01:54 PM EST, 02/03/2025 (MT Newswires) -- The Trump administration's tariffs on three key trading partners are a net negative for US hardlines retailers that could lower their next 12-month growth outlooks by about 1%, Wedbush Securities said Monday.

US President Donald Trump on Saturday announced 25% tariffs on goods from both Canada and Mexico, along with a 10% levy on imports from China. Trump said in a social media post on Monday that the US will pause the announced tariffs on Mexico for one month as the two sides engage in negotiations.

Electronics retailer Best Buy ( BBY ) is expected to be hit the most by the Mexico tariffs, with an estimated 10% to 15% of sales exposure mainly in televisions, Wedbush analysts Seth Basham and Matthew McCartney said in a note to clients. Auto part retailers O'Reilly Automotive (ORLY), AutoZone ( AZO ) , Advance Auto Parts ( AAP ) , and Genuine Parts ( GPC ) have an estimated 10% of sales exposure to Mexico. Home furnishing retailer RH (RH) has less than 20% exposure to Mexico and Canada combined, according to the note.

Almost all hardlines retailers, including auto parts retailers as a whole, have exposure to goods imported from China, led by Best Buy ( BBY ) and followed by Wayfair ( W ) , Dick's Sporting Goods (DKS), Academy Sports and Outdoors ( ASO ) , and Williams-Sonoma ( WSM ) .

There is indirect exposure to higher new vehicle costs due to Canadian tariffs for CarMax ( KMX ) and Carvana ( CVNA ) , with a "trickle-down increase" likely in used car prices. "To that end, while used auto affordability challenges could rise again, the gap between new and used car prices could move in favor of used car prices," Basham and McCartney said.

Among all hardlines categories, auto part retailers have some of the best pricing power, with most of their sales nondiscretionary. Wedbush expects Monro ( MNRO ) to benefit should low-quality tier 4 and 5 tires become less price-competitive.

Exposure to Canada is limited for most hardlines retailers, with lumber "a modest mix" of sales for Home Depot ( HD ) and Lowe's (LOW), and hardwood flooring made with Canadian lumber a small exposure for Floor & Decor ( FND ) , Wedbush said.

The brokerage expects a stronger US dollar to help counter some of the cost increases likely due to tariffs, though it ultimately expect retailers to pass along much of the increases to the consumers. Wedbush projects prolonged sales pressure in more discretionary hardlines categories such as mattresses, flooring, furniture, and sporting goods and for retailers that cater mainly to lower-income customers.

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