The former CEO of Sears Canada, Mark Cohen, says corporate America is “terrified” of President Donald Trump’s escalating trade war, but CEOs of big-box retailers are too afraid to speak out against it.
TL;DR
- Former Sears Canada CEO Mark Cohen calls business leaders "cowardly" for not confronting Trump's tariffs.
- Retailers are struggling with tariffs, impacting inventory, margins, and supplier negotiations.
- Tariffs are a "time bomb" burdening supply chains, causing price hikes and liquidity crises.
- Cohen warns of a deep recession if tariffs continue, with consumers and businesses facing severe impacts.
“Few in industry are speaking out loud about [this], for fear of retaliation, which is a form of cowardice,” Cohen, who also retired as the director of the retail studies program at Columbia Business School, told Coins2Day. “They are frantically trying to figure this out,” he said, describing retailers and manufacturers calling him panicking under the pressure to rewrite forecasts, protect margins and renegotiate with suppliers.
Retailers have benefited from their spring and summer strategies of building inventory and lowering the quality of certain products, which enabled them to maintain affordable prices. According to him, this is why the back-to-school season proved advantageous for vendors.
“The party is over now,” Cohen said. “The goods you see on a shelf in advance of this holiday season will have been fully burdened by tariffs.”
He stated that some large companies, such as Walmart, will manage to maintain stocked shelves and competitive pricing. However, for smaller and medium-sized manufacturers and retailers, “this is a deadly COVID-19-like-crisis.”
“I don’t want to sound alarmist here,” Cohen said, “but the sum total of what Trump is up to is catastrophe personified.”
Tariffs are ripping through supply chains, forcing price hikes and crushing businesses
Cohen contended that tariffs have evolved into a concealed time bomb within the U.S. Economy, its effects postponed due to Trump's negotiation tactics and wishy-washiness concerning certain Liberation Day tariffs.
Tariffs, unlike sales taxes, are levied well before a product is available for purchase.
“Almost everything we consume… is being burdened with these taxes, with these tariffs that he’s created,” he said. “What Trump has done is created a burden on every element in the supply chain.”
Companies also must now front tariff payments before goods clear customs; a shift, he said, that has already triggered a liquidity crisis across “tens of thousands” of smaller importers.
“It’s not been part of their financing structure to be able to support this incremental, sudden, inflated cost of doing business,” Cohen said.
Even major retailers are struggling presently. For instance, IKEA's long-standing practice of maintaining low prices has recently ceased: a bedroom furniture set increased by $90 within two months, according to and Wall Street Journal. Cohen noted that for a budget-friendly retailer such as IKEA, appealing to younger individuals and less affluent shoppers, increasing prices would be detrimental to its brand image. Cohen further stated that IKEA's decision to raise prices indicates that tariffs are impacting all businesses.
“There’s no one who can shelter from this,” Cohen said.
So far, consumers have been accepting the tariffs in a stride, with Bank of America estimating that consumers spent 0.6% more year-over-year in September. However, the S&P reported last week that companies will incur at least $1.2 trillion more costs this year than expected due to tariffs, and that large retailers will take the largest hit at $907 billion. Of that $907 billion, roughly two-thirds of the impact of tariffs, or $592 billion, is being passed to consumers in the form of higher prices.
Corporate “cowardice”
Cohen believes that the leaders of major retail companies ought to intervene to protect the wider retail sector from tariffs and to petition the White House against them. He stated that if he were still in charge at Sears Canada, he wouldn't be a “coward,” and would be adding extra price hikes to his products so that shoppers could observe that the escalating expenses were a result of tariffs.
“I would be very actively engaged in efforts to stop this train, because the notion of this going on for the next three and a half years brokers the possibility of a deep recession here,” Cohen said. “Especially since the world is eminently ready to retaliate.”
Cohen contended that the U.S. Is currently caught in a cycle of retaliation. He cited China's limitations on rare-earth minerals, Canada's reaction to tariffs on timber and automobiles, and European allies now devising counter-measures that will probably raise expenses for American businesses. Trump starts each day with a “new fight on his hands,” influencing the industry “nuts” because they're unable to schedule inventory or set prices.
With rising prices suppressing demand, Cohen said many businesses will choose to slash orders in the upcoming holiday season, triggering layoffs and accelerating economic slowdown.
He thinks that a combination of inflation, supply chain issues, recent labor shocks from the deportations of undocumented labor, and political payback is driving the U.S. Closer to another financial downturn.
“Americans are going to get slammed,” he said, noting that 70% of Americans already live paycheck to paycheck.
But what alarms him most is the silence from the business community. He thinks maybe chief executives are “privately” lobbying Trump, but sees that strategy as a dead end.
“IKEA may very well be the canary in the coal mine.”