Price hikes triggered by the Trump administration’s tariff policies will soon become a reality for Walmart shoppers. The company announced earlier this month that it will increase prices across a range of categories, including grocery, electronics and toys, in which it is heavily reliant on imported merchandise. That’s a bitter pill to swallow for a retailer dedicated to helping customers save money. But, as chief executive officer Doug McMillon explained during a conference call about Walmart’s first quarter results, current conditions in the marketplace left it no choice.
“We will strive to keep our prices as low as possible,” he said. “However, due to the significant scale of the tariffs, even with the reduced rates [recently] announced, we cannot absorb all the pressure given the reality of slim retail margins.”
While over two-thirds of the products that Walmart sells in the U.S. are produced in this country, that still leaves it exposed to increased costs and supply chain disruptions in a host of categories. “All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact,” McMillon explained. “The cost pressure from all the tariff-impacted markets started in late April, and it accelerated in May.”
A few days before he spoke to analysts, the U.S. and China called a 90-day truce in their clash over trade, substantially reducing the astronomical tariffs that promised to cause commerce between the two nations to grind to a halt. Tariffs on imports from China have been cut, at least temporarily, from 145% to 30%. That’s still an elevated number that will hurt Walmart and other American retailers as they strive to control pricing.
Walmart deserves credit for being straightforward with consumers. Not long ago, Amazon reportedly was planning to call out the impact of tariffs for each product sold on its website, and then backed away after President Trump had a conversation with Jeff Bezos, the e-commerce company’s founder and chairman.
Whatever information retailers decide to provide to customers, it’s clear that the trade policies pursued by the Trump administration will complicate their business, requiring them to make hard decisions between pricing and profit margins. If Walmart has reached the conclusion that it has no other option than to raise prices, it is very likely that other retailers, which don’t enjoy the same scale, resources and global reach, will be forced to follow suit.
