The significant decline in the stock market this week has affected numerous companies, including some former favorites among investors. One notable example is the veteran retailer Target (TGT), which experienced a nearly 8% drop in value during this period, as reported by S&P Global Market Intelligence. This decline has raised concerns among investors and analysts regarding the company’s significant exposure to its major trading partner, China.
China has been a focal point since the introduction of tariffs by the Trump administration that took effect this week. Analysts have warned that companies with substantial business operations in China might suffer significant negative impacts, reflecting the apprehension of investors.
Bernstein’s Zhihan Ma has articulated this concern, highlighting the tariffs’ implications for the retail sector. In her analysis, she identified Target and the discount retailer Dollar Tree as the two companies most vulnerable to China-related risks within her sector coverage. Ma’s calculations indicate that both businesses have approximately 50% direct and indirect reliance on Chinese manufacturing. Consequently, the new 34% tariff imposed by the administration is expected to substantially increase costs for these retailers.
Conversely, Ma pointed out that some retailers are comparatively better positioned to weather the impact of these tariffs. She identified Walmart, Costco, and Dollar General as companies that appear more insulated from the effects of the new levies. According to Ma, Walmart and Costco, in particular, have not only limited exposure to the affected exporters but also possess the bargaining power to negotiate more favorable pricing with their suppliers.
Eric Volkman, the article’s author, holds no positions in any of the mentioned stocks. Meanwhile, The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart, as disclosed in its policy.
