The threat of higher US duties and tariffs has spooked Costco.
The warehouse club—known for it’s discount products in bulk quantities—updated the “risk factors” section of its most recent annual report to explicitly add a warning that import taxes are a risk to its business success.
The document was filed with the US Securities and Exchange Commission on Oct. 18 and comes just as the Trump administration’s renegotiations of the North American Free Trade Agreement (NAFTA) seem to have reached an impasse. In his public statements the US president has made clear that he’s willing to terminate the deal that drastically lowered the import taxes leveled by the US, Canada, and Mexico on each other’s products.
These are the additions and the deletions the company made to the passage:
Higher energy and gasoline costs, inflation, levels of unemployment, healthcare costs, consumer debt levels, foreign-currency exchange rates, unsettled financial markets, weaknesses in housing and real estate markets, reduced consumer confidence, changes and uncertainties related to government fiscal and tax policies, including increased duties, tariffs, or other restrictions, sovereign debt crises, and other economic factors could adversely affect demand for our products and services, or require a change in product mix, or impact the cost of the mix of products we sell or ability to purchase inventory.
Being a warehouse store, Costco has comparatively lower distribution expenses from the border to its customer. Traditional retail and grocery have transportation, warehousing, supplier, and staffing costs that need to be added onto the price of an item, where Costco does not. This lower level of costs from importation-to-customer means that new tariffs will likely have a greater impact on the sticker price of an item at Costco than it would at other types of stores.