Border tax is 'biggest threat' to retailers in years, former Saks CEO says

Border tax an 'existential threat' to retailers: Sadove

Retailers are up against the "biggest threat that they've seen in years" with President Donald Trump's proposed border adjustment tax, retail chief Steve Sadove said Thursday.

The tax would be levied on imports to encourage more manufacturing to move stateside and offset Trump's planned tax cuts.

Sadove, who currently serves on the executive committee and the board of the National Retail Federation, said it would hit large importers and consumers alike.

"I view it as an existential threat to the retailers," Sadove told CNBC's "Squawk Box." "And the entire industry is mobilizing against it."

"This is war," the former Saks CEO and chairman added.

On Wednesday, a group of leading retail executives met with Trump to push back against the border tax proposal and explain the damage it could have on their businesses.

Sadove said removing the critical provision that allows retailers to discount the cost of their imported products would hit an industry whose revenue-expense ratios are already thin.

"If you can't deduct the cost of goods, have to pay a tax on the full amount of the revenue, and your margins are not that high in retail to begin with, you're essentially going to be paying tax on the money that you're not making," Sadove said.

He argued for more even-keeled tax reform that doesn't place the burden of funding squarely on retailers and mass importers.

"I think that you're going to have to look at loopholes, you're going to have to look at other means of generating revenue," Sadove said. "I'm just not sure it all ought to be falling on the backs of the retailers and to the benefit of some very large exporters."

Tax reform is critical, Sadove said, but not the kind that creates winners in large U.S.-based multinationals and losers in American retailers and, more importantly, consumers.

"Think about the lower-end consumer," Sadove said. "The prices will go up. But ... they're not going to go up enough to offset the losses that the brands will [see], and the consumer."