While healthcare and caravans have dominated the closing messages that Democrats and Republicans are making in the lead up to Tuesday’s midterm elections, the results could have a sizable impact upon the retail industry, especially e-commerce.
For instance, if Democrats take control of the House, they could push back on President Trump’s tariff policies. Such policies have left a broad swath of retailers from Walmart Inc. (No. 3 in the Internet Retailer 2018 Top 1000) and Target Corp. (No. 17) to Samsonite International SA (No. 152) and Vera Bradley Inc. anxious about their supply chains, particularly given the September announcement of tariffs on $200 billion of Chinese exports, which Trump has said will be increased from 10% to 25% next year.
For example, the tariffs led Samsonite to notify wholesale buyers of a 10% price increase even before the September tariff announcement. Samsonite noted that the wholesale price increase was likely to trickle down to consumers. Michaels Cos. CEO Chuck Rubin warned that an estimated $400 million of its product costs would be subject to the tariffs. And Steve Bohman, Vera Bradley’s vice president of global sourcing, said in September the tariffs would “have a detrimental effect on our company, costing us jobs and/or burdening our customers with higher prices.”
A pushback from Congress is overdue, says David French, the National Retail Federation’s senior vice president, government relations. “The next Congress will have to find a way to wrestle control of the tariff issue in order to get control and restrain the president’s ability to wage a trade war,” he says. “The current Congress hasn’t focused enough on the issue.”
A Democrat-controlled House might also derail the U.S.-Mexico-Canada Agreement, or USMCA, which includes a few key provisions that will yield key benefits for online retailers. For instance, both Mexico and Canada will increase their de minimis shipment value levels, which is the minimum value of an imported shipment that is subject to duty collection and customs documentation. Mexico is doubling its de minimis threshold to $100 from $50, and Canada is doubling its threshold to C$40 from C$20.
The deal is subject to a majority vote in both chambers of Congress and the vote for the deal will likely come in late-March or early April. Voting for the deal would give Trump a “win,” which Democrats might be unwilling to do without certain environmental or labor-related changes to the agreement.
The Trump administration’s push to roll back regulations also might receive fresh scrutiny from a Democrat-controlled House, say experts. For instance, there’s an ongoing rule-making battle over an Obama-era labor policy that made companies more likely to be liable when staffing firms or franchisees don’t pay minimum wages and overtime. Democrats last week argued the National Labor Relations Board isn’t providing the details they’ve requested about its decision to change current regulations about when multiple companies share joint liability for labor law violations.
However, there is one area that likely won’t see any action, regardless of how the midterms pan out: online sales tax regulation. While several bills have been introduced since the U.S. Supreme Court’s decision in Wayfair v. South Dakota, which allows states to require out-of-state merchants to collect and remit local sales tax on goods sold to their residents, few expect any bills to gain traction and see a vote.
“The states have already taken the lead here and congressional legislation would create more problems than it solves,” says Jason Brewer, executive vice president, communications and state affairs at the Retail Industry Leaders Association.
NRF’s French agrees, noting that there’s little consensus within Congress as to how to address the online sales tax issue. “There are many different viewpoints, but there’s no consensus,” he says. “Without a consensus opinion, the best option is to let the states figure it out.”
As of Nov. 1, 22 states will have statutes or regulations in place to require sales tax collection by remote sellers, according to Vertex Inc., a tax technology company.