Tariffs make 'no sense' for businesses, the National Retail Federation CEO says

  • Businesses are increasingly investing thanks to the tax reform, but the National Retail Federation's Matthew Shay says tariffs will likely reverse positive effects.
  • "We're going to erase it all with a potential trade war," he says. "It makes no sense."
  • He says businesses and consumers will be the losers: businesses with uncertainty and consumers with higher prices.

Tariffs could end up reversing the benefits from President Donald Trump's tax reform, the head of the National Retail Federation told CNBC on Friday.

Matthew Shay, the association's president and CEO, said businesses and consumers have been faring well from the reform, but that's now in jeopardy.

"[Companies are] investing in their businesses. They're investing in their people. They're expanding. They're doing all these great things," Shay said on "Squawk Box." "And we're going to erase it all with a potential trade war."

"It makes no sense to go down this road when we have all this momentum," he added.

Shay said individuals' gains have been reflected in strong consumer confidence.

Trump signed the Tax Cuts and Jobs Act last December, slashing the corporate tax rate — as high as 39 percent for some businesses — to a flat rate of 21 percent. Since then, unemployment has fallen to historic lows and there are now more jobs in the U.S. economy than people looking for work.

But in March, Trump announced steel and aluminum tariffs for select countries to correct what he deemed were unfair trading practices.

Since then, the market has continued to fluctuate wildly since as investors fear possible trade wars.

On May 31, the Trump administration announced its decision to move ahead with the metal tariffs on the European Union, Mexico and Canada.

Market watchers are on edge in fear of retaliatory tariffs.

Tim Ryan, U.S. chairman and senior partner at PwC, said on "Squawk Box" that relationship-building is an important part of any business.

Ryan, whose firm consults CEOs from a wide range of industries, said: "They love tax reform. They love regulatory reform. And they do think we need better trade deals."

"Now, having said that, they also believe we need long-term and global relationships in order to be sustainable businesses and take care of our own workers," Ryan said.

Shay said individuals and businesses will ultimately end up paying for the tariffs: consumers with higher prices and businesses with the uncertainty the tariffs create over sourcing and supply chain issues.

He acknowledged that Trump runs "an unconventional administration," with new negotiating tactics.

"But in the meantime, you're going to see prices start to creep up for consumers," Shay said.

"Our trade policies ought to hit the right target, and the right target is China," he said. "The right target is not American consumers."

WATCH: PwC U.S. Chairman Tim Ryan talks CEOs and business.

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