Moody's Investors Service said Aug. 2 that the largest names in retail are better equipped to offset the effects of the new tariffs on Chinese goods.
On Aug. 1, U.S. President Donald Trump said on Twitter that he would impose a 10% tariff on $300 billion worth of Chinese imports. Retail stocks in the U.S. plunged following the announcement.
The rating agency said companies such as Walmart Inc., Target Corp., Costco Wholesale Corp., Amazon.com Inc. and Best Buy Co. Inc. have enough diversity in their supply chains, as well as adequate advanced purchases over the past several quarters to significantly cushion the possible damage. Such companies also have more pricing power with vendors and financial strength to take in what could most likely be temporary price hikes, Moody's added.
Moody's also noted that retail companies, particularly larger ones, have taken steps to reduce their reliance on any one country or region, including China. However, China remains a key source for many retailers and a "disproportionately high source" for some.
"We believe the largest, strongest retailers have enough levers to pull with vendors, sourcing diversity, and breadth of non-tariff impacted products to weather the storm with minimal disruption," Moody's said.