Mike Baudendistel, head of intermodal solutions at FreightWaves SONAR, discussed on The Stockout’s election special Monday what Tuesday’s presidential election might mean for the retail and consumer packaged goods industries.
Baudendistel broke down several policy issues, culminating in predictions on whom he thinks stakeholders would vote for on each topic.
Tariffs
Up first on the agenda was tariffs, a hotly debated topic between presidential nominees Donald Trump and Kamala Harris.
“Trump says he will impose a 60% tariff on Chinese imports and impose a 10% tariff on all other imports,” Baudendistel said. “The Tax Foundation says it would raise the average tariff to 17.7% – that’s going to be the highest since about the 1930s when tariffs were just much more commonplace than they are today.”
Baudendistel said most experts believe this is something that can be achieved rather quickly and without congressional approval using Section 232 of the Trade Expansion Act or Section 301 of the Trade Act of 1974.
That said, there’s been a lot of back and forth from various trade groups on whether this would be a good policy.
“Some former Biden administration economic and tax advisers say it would initially raise consumer prices by 1-5%,” Baudendistel said. “That’s about seven months of normal inflation, so there’s debate about whether this is in the good long-term interest of the U.S. economy. But I think in the short term most people are on the same page that this is going to cause inflation in consumer products.”
One vocal opponent of the tariffs is the National Retail Federation, which argues that tariffs are a tax on everyone and a tax on the U.S. companies doing the importing rather than exporters from China.
“They’ve been very critical of what Trump has outlined, but they’ve also been very critical of Biden for not reversing the tariffs that Trump had put in place and adding new tariffs,” Baudendistel said.
Possible retaliatory tariffs for U.S. exports to China could see soybeans for animal feed as well as pork take an economic hit.
Baudendistel said the Consumer Brands Association (CBA), which advocates for the CPG industry, was not as aggressive in its review on tariffs.
“They say tariffs can be beneficial when used in the right circumstances but harmful if applied without a certain due diligence …,” Baudendistel said. “The CBA also brings up a point – which is a concern of mine also: Some of the ingredients that go into the manufactured consumer packaged goods can only be found overseas. You think about things like cocoa that goes into chocolate; that’s going to be grown in Africa and almost only Africa.”
Baudendistel’s prediction: “I think retail would vote for Harris [because] they don’t want the tariffs. CPG I think [is] a little bit split. I think they would have higher costs for some things with some ingredients but maybe lower costs for others.”
Federal Trade Commission
Baudendistel said the next big topic for the election is the Federal Trade Commission. He said there’s speculation that Commissioner Lina Kahn could be replaced as the head of the FTC if Trump is elected.
“Elon Musk is clearly not a fan,” Baudendistel said. “He said in a tweet that she’ll be fired soon. That was in response to a lot of praise for her on the left. … Lina Kahn has been very critical of a lot of the mergers and has tried to block a lot of the megamergers – including some that are in the retail industry.”
Baudenstiel noted that the FTC sued to block a Kroger-Albertsons acquisition in February. He said the FTC also filed a lawsuit against Amazon for alleged monopoly practices.
Baudendistel’s prediction: “Based solely on the issue of the FTC, I think the larger [retailers] like Kroger and Amazon would favor Trump [and] like to see it a lot different. Some of the smaller ones, though, might go to Harris. They might say, with the FTC being hard on Amazon – which is so dominant in e-commerce – maybe that’s a good thing and it helps other retailers compete on a level playing field … . I think on the CPG side, there’s less impact from the FTC on the CPG industry just because for most of those product categories, it’s a little more fragmented [and] there’s not as many barriers to entry.”
Taxes
Baudendistel said the Harris policy for a tax on unrealized capital gains for people who have over $100 million in net worth would require companies be valued before they were sold.
“The one example that comes to mind is Clif Bar, which not long ago was sold to Mondelez for $2.9 billion,” Baudendistel said. “It was started by an entrepreneur. Let’s say, before that company was sold, it would have been very hard to value it.”
He said he thought it would be very difficult to extract an unrealized capital gains tax applying to entrepreneurs like that.
Also, Baudendistel said he thought Trump’s plan not to tax overtime pay would be difficult to monitor.
“Could people scale back and say, ‘My regular pay hours are 30 hours, it’s been 40 hours, therefore I get more overtime so I pay less taxes?’” Baudendistel said.
Baudendistel’s prediction: “I think the CPG industry on taxes would go Trump, and I would say retail also would go taxes on Trump. He’d leave more money for retail spending, so I think Trump wins that one.”
Food regulations
Possibly the sleeper issue among the policies discussed, Baudendistel said food regulations could have an impact on the outcome of the election as well.
“What Trump has said about food regulation is he wants to put RFK [Robert F. Kennedy] Jr. to lead U.S. health and food safety,” Baudendistel said. “He wants to make him this kind of this broad health czar. The quote that Trump said at a recent rally was, ‘I’m going to let him go wild on health. I’m going to let him go wild on food. I’m going to let him go wild on medicine.’”
With Kennedy opposing food dyes, seed oils and pesticide-intensive agriculture, Baudendistel said this topic could really shake up CPG companies if Trump is elected.
“Kamala Harris says that RFK Jr. is the exact last person for that role,” Baudendistel said.
He said retail probably wouldn’t want this either because it could be hurt by marketing changes similar to what other countries enforce.
“Some other countries don’t allow cartoon mascots, for instance,” Baudendistel said. “Some of the cereal that’s sold in Mexico that’s targeted at children, it’s the same box in Mexico that’s sold in the United States, but they have this big stamp over the cartoon character … because they feel that those cartoon characters would appeal to children.”
Baudendistel’s prediction: “The CPG and retail industries would support Harris on [whether] they want or not want to overhaul the food regulations which could potentially come down the pipeline if Trump were to be elected.”