President-elect Donald Trump’s proposed tariffs could have unintended consequences for certain brands, such as negative sentiment from Chinese consumers that could hurt U.S. companies’ sales in that country, Bernstein found. “The tail risk of China demand backlash is less likely and harder to predict but could be devastating for China-exposed brands,” analyst Aneesha Sherman wrote in a Tuesday note. Some of the companies at risk of the demand-side backlash include Nike , Lululemon , Tapestry and Capri Holdings , she said. Trump has called for a universal tariff of at least 10% on all imports and a duty of at least 60% on Chinese goods. He doubled down on this sentiment in late November, when he said on social media platform Truth Social that he would raise tariffs by an additional 10% on all Chinese goods coming into the U.S. and impose 25% levies on products coming from Canada and Mexico. Although Trump’s proposed tariffs represent a U.S. policy shift, all Western brands will likely experience a downturn in sentiment, “as Chinese consumers will bucket them together as foreign brands rather than discern between US vs. Canada (e.g. LULU) vs. Europe (e.g. Adidas),” Sherman said. A similar fallout also occurred among Chinese consumers in 2021 after the Better Cotton Initiative suspended its operations in China’s Xinjiang region. Chinese consumers then boycotted not only U.S. brands such as Nike, but also European names such as H & M, Adidas and Burberry, the analyst noted. This “caused a major dent to sales and profits in that market,” Sherman said. — CNBC’s Michael Bloom contributed to this report.
A risk beyond tariffs that could be ‘devastating’ for U.S. brands in China, per Bernstein