CEO Concerns

As we enter the final quarter of 2018, a key concern for CEO’s is the recent trade policies enacted by the administration. After another $200 billion in tariffs went into effect, the Business Roundtable reported that roughly two-thirds of CEO’s believe that these recent tariffs and resulting trade tensions will negatively affect their capital investment strategy over the coming six months.

While economic growth was up more than 4% in Q2, the inability of policy makers to find alternatives to address foreign trade issues, has CEO’s concerned. Per Joshua Bolten, Business Roundtable President and CEO, “Tax reform and regulatory relief continue to bring strength to the economy, yet current trade policies and uncertainty about future trade policies are having negative effects, especially on capital investment.”

The concern runs deep in the retail sector. Per Axios, here are what a number of retail CEO’s had to say:

Brian Cornell, Target CEO, “We’re concerned about tariffs because they would increase prices on everyday products for American families … When we’re faced with tariffs or any other external factors, there are multiple levers we can pull to remain price competitive and maintain profitability.”

Bruce Besanko, Kohl’s CFO, “We’re working with our vendors and internally to assess any [tariff] impact to Kohl’s. It is important to note that we have a nice diversity across our manufacturing base, and of course, the tariff hasn’t yet been applied to apparel but we’re, obviously, monitoring the situation closely.”

Laura Alber, Williams Sonoma CEO, “We are aggressively working to mitigate the potential impact of these tariffs on our financial results while maintaining our customer value proposition.”

Fabrizio Freda, Estee Lauder CEO, “We are closely watching the evolving global issue concerning tariffs and trade … We believe we will have some flexibility to address the potential input of existing and proposed tariffs and remain committed to satisfying global consumers with our quality products.”

While consumers have not yet seen the impact of the tariffs, Barry Sternlicht, CEO of global investment group Starwood Capital, believes that will change in the first quarter of 2019, which could contribute to a recession.

More broadly, at the beginning of the year CEO’s were bullish on 2018, most likely buoyed by the overhaul of the corporate tax system. Per PwC’s CEO Survey, “This year saw the highest-ever jump to a record level of CEO optimism in global economic growth over the next 12 months. However, this burst of positivity regarding the macro economy does not translate into an equivalent surge of confidence in their own organisations’ growth prospects.”

“Each region reports a different mix of threats as the most concerning, but one general global observation is that CEOs across the world are increasingly anxious about broader societal threats — such as geopolitical uncertainty, terrorism, and climate change — rather than direct business risks, such as changing consumer behaviour or new market entrants. The threats that trouble CEOs are increasingly existential.”

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