2020 Election preview: Consumer products
INSIGHT ARTICLE |
With the election approaching, RSM is looking at the economic stakes and the key issues for various industries and sectors. This is one in our series of election previews.
The top policy issue for consumer products
The presidential candidates’ stances on leadership and policy differ significantly. For example, President Trump opposes increasing the minimum wage to $15 dollars an hour, whereas former Vice President Biden supports the increase. Furthermore, Biden supports raising federal taxes on both individuals and corporations, while Trump reduced rates for both groups. However, there are consumer products industry policies that don’t always make the headlines, but will affect middle market businesses nonetheless.
Prior to the pandemic, trade policy, specifically tariffs, were a major concern among retailers, growers, manufacturers and distributors of all types of consumer products. Steep tariffs already increased companies’ costs, causing prices to increase for consumers. Given that companies have had to incur additional cost measures during COVID-19, there is only so much more they can take on before costs must be passed along in part to consumers. Post-pandemic supply chain disruptions further exacerbated companies’ challenges as they looked for additional sources.
If Trump wins
The Trump administration believes tariffs and a protectionist trade policy boost domestic manufacturing and shield the United States from “rampant trade cheating.” At the Republican National Convention, Trump commented, “We will impose tariffs on any company that leaves America to produce jobs overseas.” According to an Aug. 27 Reuters article, Trump suggested at a campaign rally that he will provide tax credits to companies that bring jobs back to America.
If Biden wins
During the campaign, Biden has commented that he would repeal the tariffs put in place by the Trump administration. Throughout Biden’s time in Congress, he was a proponent of free trade in order to advance globalization and prosperity. Biden aims for a more tempered international approach, collaborating with allies to protect against unfair practices. However, on his campaign website, he would “impose a tax penalty on corporations that ship jobs overseas in order to sell products back to America.” Biden’s tax penalty may end up driving increased cost to consumers in a fashion similar to tariffs.
Other consumer products issues:
The rate of evolution in consumer products e-commerce has grown exponentially since the onset of the pandemic. As consumers switched to eating and shopping from the comfort of their own home, restaurants and retailers have had to maneuver quickly to not only accept and deliver orders, but also to capture consumer data to help understand consumer preferences and gain customer loyalty. Current regulations may not be enough to ensure that consumers have control of how their personal data is stored, used and shared.
Trump has said he would support federal consumer privacy legislation. However, on his campaign website, he touts his record of rolling back over 860 regulatory actions during his first term. According to Reuters, in 2017 he repealed regulations adopted “by the Federal Communications Commission…requiring internet service providers to obtain consumer consent before using precise geolocation, financial information, health information, children’s information and web browsing history for advertising and marketing.”
Biden has said the United States should set privacy standards similar to those set in Europe under the GDPR. In 2012, then California Attorney General Kamala Harris created California’s Privacy Enforcement and Protection Unit and provided recommendations for businesses on how to follow privacy regulations. A Biden/Harris administration could help advance federal regulations protecting consumer privacy.
The Trump administration’s effect on the industry has been mixed among companies in the consumer ecosystem. Lowering the corporate tax rate has proved favorable, but navigating tariffs proved difficult even before the pandemic-induced upending of the economy. The lockdown itself caused irreparable damage to restaurants and brick-and-mortar retail, whereas some food manufacturing and distribution companies reported record revenues. The mixed results and a slow economic recovery are causing middle market business leaders to remain hopeful yet cautious.
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