11:55 AM EDT, 04/04/2025 (MT Newswires) -- President Donald Trump's new tariffs could negatively impact demand for discretionary retailers and result in significant margin declines, Oppenheimer said in a Friday note.

The near-term outlook for leading consumer discretionary companies is as uncertain as it was during the early stages of the Covid-19 pandemic, the brokerage said. Despite pullbacks, stock valuations in the sector do not reflect the risk of a potential recession or a significant slowdown in consumer spending, analysts, including Brian Nagel, said.

The sector's dynamics could rebound if the proposed tariffs on major manufacturing nations like Vietnam are reduced or reversed. However, Oppenheimer is turning less upbeat on serious trade negotiations, "given increasingly erratic, even less logical, rhetoric" from the US administration.

Late Wednesday, Trump announced duties on imports from several countries, including China and Japan. A 10% base tariff rate takes effect for all nations Saturday, though there will be additional duties that vary by country.

"As currently outlined, tariffs instituted or planned to be enacted by the US afford even well-positioned operators very little, if any, potential for geographical re-positioning within supply chains, particularly near-term, and could lead to meaningful margin degradation and/or demand destruction, beginning as soon as the next several weeks," Nagel wrote.

The sweeping tariffs is expected to deal a blow to discretionary spending, resulting in few clear beneficiaries, Nagel said. However, auto parts retail companies are in a better position than others, and so are used car retailers, but to a lesser extent.

Athleisure brands Nike (NKE) and Lululemon (LULU) source roughly 40% of their cost of goods sold from Vietnam, according to Oppenheimer. Home furnishing retailer LoveSac ( LOVE ) has a 50% sourcing exposure to Vietnam.

Retailers Dick's Sporting Goods (DKS) and Best Buy ( BBY ) source 85% to 90% of their cost of goods sold internationally, either directly or indirectly, the note showed. Excluding any mitigation efforts, net tariff costs for the two companies are estimated to track upwards of 40% to 45%, Nagel said.

Home improvement retailers Home Depot ( HD ) and Lowe's (LOW) are among the companies with the least exposure to tariff-related impacts, with about 40% of cost of goods sold sourced internationally, Oppenheimer said. Tractor Supply ( TSCO ) sources 10% to 15% internationally.

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