Practical Ecommerce

Does President Trump affect ecommerce?

November 9 in the U.S. likely felt about the same to many folks there as June 24 did here in the U.K. We had Brexit. The U.S. has Donald Trump. About half the population is terrified, the other half is elated, and the vast majority is surprised. But it happened and commerce cannot stop.

I addressed, in June, how Brexit could affect my ecommerce business. Like Brexit, the election of Donald Trump does not change the world immediately. There will likely be a period, hopefully brief, where orders will drop and consumers will be cautious about spending money. This will pass. For one thing, nothing will happen until January, when Trump is inaugurated, and even then change will take time to ripple down to small businesses. But merchants must plan for potential changes.

The dollar has already slipped a bit. It may fall further. This will make it more attractive for U.S.-based merchants to sell internationally. Thus U.S. companies should try to increase cross-border sales, including new markets, but perhaps after the current holiday season.

In 2017 the markets may change. Whilst nothing is certain, the Trump administration could impose import barriers to reduce competition from non-U.S. sellers like me. This would presumably be beneficial to U.S. retailers but harmful to U.S. consumers, who would likely pay more for fewer choices. So a Trump presidency could temporarily help domestic sales and the weaker dollar could help international sales, but only until other nations retaliate and impose their own import barriers.

For many years, the trend has been for more globalization. With the world shrinking and tariffs and trade barriers reducing, merchants worldwide have enjoyed access to other markets. Many ecommerce companies have taken advantage of this and have become worldwide sellers. If the U.S. starts to impose trade barriers, it will hurt foreign sellers like me and initially benefit U.S. sellers.

Many countries could hesitate to retaliate against U.S. trade barriers, enabling U.S. merchants to sell without impediment. Over time, however, more and more countries will retaliate. This could occur in different ways. For example, the U.S. could reduce agreed-upon environmental, safety, and other standards, as implied by Trump. This would make those U.S. products not exportable to, say, the E.U., which imposes those standards.

Moreover, trade barriers will inevitably increase import costs for manufacturers and thus prices will rise. We have already seen this with Brexit, with the weak pound. U.S. manufacturers will likely have a double hit from both a weaker dollar and trade barriers. So after a year or two, all of this could harm ecommerce sales for U.S. merchants and drive up prices and reduce selection for U.S. consumers.

U.S. merchants should therefore review their inventory and try to reduce their dependency on goods that rely on imports. Likewise, U.S. merchants should increase their inventory of products less likely to incur international trade hiccups. The trick is to predict which items that will be.

For me, in England, my biggest concern is that I will be forced to charge sales tax for U.S. orders, and then somehow pay this tax to all the relevant U.S. authorities. No amount of playing with inventory will mitigate this. If it happens, most of my competitors and I will likely stop selling in the U.S. This is my 2018 or 2019 worry.

To offset this, I will look to expand my sales to the rest of the world. Canada looks attractive, as does Australia and New Zealand.

I suspect that Trump’s election, like Brexit, will take a long time before it changes day-to-day business. Even then, the extent of the change may be much less than feared. It is, however, better to plan for the worst and diversify, thus minimizing the risk.

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Comment ( 1 )

  1. Carlos Rivera November 15, 2016 Reply

    Awesome analysis, Thank you! Cheers!