All The Retailers That Could Feel The Effects Of The GOP's Tax Efforts

A tax proposal known as a “border adjustment” proposed by Republicans in the House of Representatives could ding major American retailers who rely on imported products.

The policy change, which would tax imports and exempt exports, was criticized this week by President-elect Donald Trump, who termed it “too complicated,” according to the Wall Street Journal.

What Could Happen

Large, import-dependent retailers such as Costco Wholesale Corporation COST, Wal-Mart Stores IncWMT and Home Depot Inc HD were up Tuesday after the pushback from Trump.

The “border adjustment” would end the practice of allowing companies to deduct their overseas spending, something retailers claim could result in higher prices for consumers. The policy change could result in price increases “of up to 15 percent” to retain profitability in sectors such as retail, automotive, technology, food and fuel, the National Retail Federation said in a statement Tuesday.

William Dudley, the president and CEO of the Federal Reserve Bank of New York, spoke at a national retail convention Tuesday morning, according to the NRF.

“I think that it will probably lead to a lot of changes in the value of the dollar, in the prices of imported goods in the U.S.,” Dudley said. “I’m not sure that that would all happen very smoothly and I also think there could be lots of unintended consequences.”

Roughly 95 percent of the clothing and shoes sold in the U.S. are made overseas, according to CNBC.

WSJ pegged the earnings risk to six major retailers from the tax proposal at $13 billion, with RBC Capital Markets analyst Scott Ciccarelli telling the newspaper that the change would “wipe out” earnings for Best Buy Co Inc BBY, according to RetailDive.com.

Other elements of the tax plan from House Republicans, known as “A Better Way,” include a cut in the U.S. corporate tax from 35 percent to 20 percent.