The Fed, Fiscal Policies, and their effect on the North Face Kristen Forney Regent University Dr. Jeff Bajah ECON 230: Macroeconomics October 1, 2022 The Fed, Fiscal Policies, and their effect on the North Face The apparel industry and businesses such as the North Face are subject to great government control because of the changes that can happen through federal spending and fiscal policies. These policies and rules can change overnight and therefore change the direction of the consumer either away from buying items or instead incentivizing more spending depending on the ruling. In order to remain stable in this ever-changing environment, the North Face and businesses alike must be in strong economic standing. The Federal Reserve System and the North Face The Central Banking System of the United States is called the Federal Reserve System or “The Fed”. The primary goals and responsibilities of the Federal Reserve include, “managing the nation’s money and money supply, maintaining banking payment and transaction systems, creating and monitoring rules for banks and financial systems, ensuring that banks are offering quality products and the following consumer protection laws, and setting certain key interest rates” (Sumner & Suarez, 2022, 2nd par). Because of the wide expanse of money responsibility that the Fed controls, any form of business market or sector has some relationship with the Fed in how their money is dealt with and how certain laws are passed by the Fed that affects businesses and industries such as the apparel industry and stores like the North Face as the U.S. is the companies home country. One of the tangible ways that one can see the effects of the Fed is by rising interest rates. In recent years, the Fed has raised the interest rate so when businesses need to borrow money, it now costs more over time therefore because of the cost of funds it is negatively affecting businesses that may need money but cannot afford the interest rate costs that come with it. Central Bank and North Face Marketing The key market for the North Face is its home country, the United States. The North Face belongs to the Fashion and Apparel industry, and as a whole, it is one of the larger growing sectors in the business industry in the past few years. Some statistics on the production show that “fashion is a $1.2 trillion global industry, with more than $250 billion spent annually on fashion in the United States, according to industry analysts. Fashion and apparel industries employ 1.9 million people in the United States and have a positive impact on regional economies across the country” (Maloney, 2015, pg. 1). The North Face being a part of this industry is seeing rapid growth just like many others including their competitors. Because the central banking system for the U.S. is the Federal Reserve System, with the rising interest rates in the past few years, the North Face, and companies alike in order to reduce the negative effects of the increased interest rates have added features to their online stores such as Klarna to divide up the cost of a purchase and pay in smaller portions by interest-free payments every couple of weeks. This has been one of their recent marketing strategies to combat fiscal policies and to help draw consumers in without the additional cost that they would have to charge because of the higher interest rates. Fiscal Policies and the Impact on the North Face Fiscal policies that the federal government introduces can either hurt the apparel industry or they can encourage growth and more revenue depending on whether the economy is in a healthy place or not. Retail stores such as the North Face are affected by fiscal policies because of “consumer demand, the cost of doing business, investment decisions, and the ability to compete” (Brunot, 2019, par 1). Any tax-related policy that changes fiscally affects the amount of spending money that people have and therefore upsets how much they will buy. If people are having to spend less on taxes, then they frequently will look to buy more, and the consumer demand goes up. When higher interest rates are introduced, as mentioned above, companies must pay more in costs whether that is through operating or manufacturing costs. Deciding whether to invest introduces a level of risk when fiscal policies introduce incentives to hire more workers or use a new manufacturing system. For the North Face, fiscal policies greatly affect the business whether it is in higher taxes, costs to operate and manufacture, competitiveness in staying ahead of similar businesses, etc… One of the top negative disruptions that fiscal policies in the US cause are uncertainty in consumers. Because interest rates could rise, tax laws could change, and prices may go up, this raises a level of uncertainty and concern in customers and consumers that negatively affects the apparel industry and the North Face because of the uncertainty about pricing, and the economy as a whole that worries people into no spending money and staying out of stores. Global Market and the effects Fiscal Policies have on it The North Face as a company sells the greatest percentage of its items to consumers in the United States, but a large percentage also is bought by consumers in Asia and specifically China. Because of some recent marketing campaigns that the North Face has collaborated with in China and apparel stores there, sales have gone up for the North Face in that region of the world. While fiscal policies affect these sales, the largest wall that the fashion industry has come up against is the tariffs between the United States and China. One source on this issue says, “the fashion industry accounts for 6 percent of imports but pays 51 percent of tariff receipts, so the tariffs issues are critically important” (Amed, 2019, 5th par). Trade agreements between the two countries have led to high tension over increased costs, especially over imports which are extremely important for manufacturing production in this industry. Conclusion In conclusion, the Federal Reserve has a large holding power over companies such as the North Face, and because of this, the company is subject to just about anything that the Fed orders. Higher interest rates and fiscal policies can greatly affect the North Face and the business industry has to do its best to combat these rulings in order to stay afloat. Being a business means one has to be willing to go through times of uncertainty and know best how to maintain an audience and still draw people in with marketing strategies and tactics no matter the condition of the economy in the outside world. References Amed, I. & Balchandani, A. & Beltrami, M. & Berg, A. & Hendrich, S. & Rölkens, F. (2019), The fashion market and ‘Trade 2.0’. McKinsey & Company. https://www.mckinsey.com/industries/retail/our-insights/the-fashion-market-and-trade-2-0 Brunot, T. (2019). How do fiscal policies impact retail business? Small Business Chronicle. https://smallbusiness.chron.com/fiscal-policies-impact-retail-business-73966.html Maloney, C. (2015). The economic impact of the fashion industry. Joint Economic Committee: The United States Congress. https://maloney.house.gov/sites/maloney.house.gov/files/documents/The%20Economic%20Impact%20of%20the%20Fashion%20Industry%20--%20JEC%20report%20FINAL.pdf Sumner, A. & Suarez, J. (2022). The Federal Reserve is the central bank of the US- here’s why it’s so powerful and how it affects your financial life. Personal Finance- Business Insider.https://www.businessinsider.com/personal-finance/what-is-the-federal-reserve