There was always a hint of a miracle, but at the dayâ€™s end reality intervened – probably because the Presidentâ€™s strategy wasnâ€™t working. Probably, because his inaction was skewered by the media and by public opinion. President Trump finally decided to just sign the Stimulus bill and the Omnibus funding package. Americans will now get some additional cash, and the Government will not be shutting down.
Most people understand that President Trump loves the winter season in Palm Beach, and the Christmas Holidays are probably his favorite time of year. Whether holding court on the patio at Mar-A-Lago, dressing for a formal dinner, or taking the short drive over to the Trump International Country Club in West Palm â€“ this is truly a magical place (even in a pandemic).
A few days ago, President Trump decided to veto the $740 billion dollar bi-partisan National Defense Authorization Act (NDAA)â€“ solely because an internet item wasnâ€™t in the bill (and it wasnâ€™t even related to defense). He wanted Congress to reign-in the internet companies by repealing section 230 of the Communications Decency Act (CDA) which shields internet companies from liability on their platforms. Section 230 was not connected to the legislation, so the President attempted to justify his actions by throwing in additional reasons for the veto – like restrictions against troop withdrawals, shifting of construction project money, and re-naming of Confederate bases and monuments. This week, Congress will be in session to over-ride the Presidential veto.
The National defense Authorization Act was one of three final bills for the Congressional session and the President has now signed the remaining $900 billion Stimulus legislation – as well as the year-end $1.4 trillion Omnibus bill on Sunday 12/27. Congress approved both bills under his watch, but the President (after the fact) suddenly faulted the $600 individual check in the Stimulus package and wanted it raised to $2,000. As a cover, he also mentioned many of the â€œporkâ€ items that were (not surprisingly) stuffed into the Omnibus bill. Certainly, the pork in the Omnibus was tied to the Stimulus for good reason â€“ simply because funding for pet projects is often difficult to explain or to justify. Looking separately at just a few of the listed items – like $40 million for the Kennedy Center, $10 million for gender programs in Pakistan, and $130 million foreign aid for Nepal, or $2 billion for the Space Force – these expenses look odd and inappropriate to every-day Americans struggling to pay their rent or waiting on lines at food banks.
The Presidentâ€™s strategy may have been a year-end power grab – probably developed to show that he was the only one rolling the dice. One could speculate that the most powerful man in the world was even more powerful this past weekend. One can also speculate that his action was shaping up to be so disruptive that it might ultimately taint his legacy.
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The retail community cheered the stimulus and will certainly look past the politics of the moment. This bill-signing means new money will flow into the economy and that is greatly appreciated. There was additional good news this weekend because, even without the stimulus package, sales had already increased for the Holiday season by 3% (per Mastercard Spending Pulse).
However, the lingering problem for fashion retail is that the buying shift increasing the sales was entirely COVID related. Money moved from non-traveled vacations and non-eaten restaurant meals to other sectors of the retail economy. It is also clear that consumers shopped for home goods rather than clothes. Apparel stores, Department stores, and Accessory stores struggled to maintain customer share and didnâ€™t perform as well as the overall market. Womenâ€™s dresses and evening wear were a tough sell, as were menâ€™s suits, ties, and dress shirts. If a retailer carried outdoor clothing, loungewear, casual wear, or sporting goods â€“ there was momentum, fueled by Americaâ€™s new work-from-home economy.
In terms of fashion, China is still Americaâ€™s largest supplier and has remained so, even as President Trump commenced his attack on the imbalance of trade during an Oval Office meeting in 2017. It was reported (at the time) by Axios – that he proclaimed: â€œI want tariffs. Bring me some tariffs!â€ There were policy wonks who speculated that the Presidentâ€™s sing-song remarks sounded like a Christmas tune. The words â€œbring me some tariffsâ€ and the lyrics â€œbring me some figgy puddingâ€ seemed oddly similar.
With the â€œbring meâ€ proclamation in play, the tariff discussion was sometimes labeled as Trumpâ€™s â€œfiggy puddingâ€ strategy – since the added tariffs would probably â€œGrinchâ€ retailâ€™s all-important Christmas season. Fast forward a few years from that Oval Office meeting and it is apparent that retail has survived the tariffs, but at what expense? One thing is clear, for whatever reason or rationale, the industry sustained an inordinate amount of carnage during the Trump Administration. Even with the advent of internet buying, curbside pickup, and reduced store density, there were 29 major retail bankruptcies in this calendar year (highest in 10 years) and there are 550,000 less people employed in the retail trades than there were in February of 2020. Unfortunately, post-Christmas there will likely be even more bankruptcies.
Many overseas traders felt that the trade war environment would change (or abate) with the signing of the China Phase One Trade Agreement. Unfortunately, that deal has not yet worked out very well. To date, China has purchased only 58% of what they said they would buy, and the deal is not yet on track to resolve the problems that it was created to fix.
In spite of global realities during the world of COVID, approximately 40% of U.S. apparel still comes from China and 14% comes from Vietnam. It is rumored that the Administration is now looking to add tariffs to Vietnam in their remaining days in office, and that would mean that 54% of the apparel market would potentially remain under scrutiny â€“ and that reality is certainly an uncomfortable position to carry into the new year.
For now, we will all celebrate additional stimulus funding – because the action will definitely buy some time for the economy to heal and renew. The stimulus may not have been everything that everyone wanted, but itâ€™s certainly better than getting a lump of coal in your stocking.
Those who live and work in the retail community fully understand that Santa did not make an appearance on 34th Street this year. There was no miracle that fully encompassed the entire retail industry.
However, that being said, most everyone happily accepts the latest miracle that came from Mar-A-Lago.