Walmart, the largest retailer in the US, has become the latest company to signal that price increases may be on the horizon if President-elect Donald Trump’s planned tariffs are implemented.
While these tariffs are intended to bolster domestic manufacturing and reduce reliance on foreign imports, they also have the potential to increase costs for consumers. As the new administration prepares to enact sweeping tariffs, retailers and consumers alike are bracing for the impact.
Trump has long promised to impose significant tariffs, particularly on goods imported from China, aiming to encourage domestic production and address trade imbalances. As a result, companies are scrambling to adapt, considering shifting production away from China, stockpiling inventory, or passing cost increases onto consumers. These tariffs could potentially cut into consumer spending power, with estimates suggesting losses ranging from $46 billion to $78 billion annually, according to a study by the National Retail Federation.
Several major US retailers have already acknowledged the potential for price increases in the face of these tariffs. Walmart’s CFO, John David Rainey, confirmed that while the company is committed to its “everyday low prices” model, it may have to raise prices on certain items if tariffs are enacted.
“There probably will be cases where prices will go up for consumers,” he said.
Rainey acknowledged that it’s too early to pinpoint which products will be affected. Walmart’s global sourcing strategy already includes a diversification of suppliers, helping to mitigate some of the impact of potential tariffs on Chinese goods. However, certain categories, like electronics and apparel, may see higher prices as a result of the new import taxes.
Similarly, Lowe’s CFO, Brandon Sink, highlighted the risks associated with increased tariffs, particularly given that around 40% of the company’s cost of goods sold comes from overseas, including China. While Lowe’s has yet to finalize details, the company has already been in discussions with suppliers to prepare for the potential changes.
The broader implications of Trump’s tariff policies have been a point of concern for many in the retail sector. If the tariffs are imposed at the levels proposed during Trump’s first term, GlobalData managing director Neil Saunders predicts that retailers will have no choice but to pass some of these increased costs onto consumers. This could result in higher prices across a range of products, from clothing and electronics to home improvement items.
The National Retail Federation has warned that tariffs could be akin to a tax on American families, driving up inflation and eroding consumer purchasing power. While inflation in the US has moderated in recent years, the introduction of higher tariffs could counteract these gains, particularly for goods heavily reliant on Chinese imports.
While the tariffs may lead to higher prices in the short term, President Trump’s supporters argue that these measures will ultimately benefit the US economy by creating jobs and encouraging investment in domestic manufacturing. The administration has suggested that tariffs will be paired with corporate tax cuts, particularly for manufacturing firms, to incentivize companies to move production back to the US. Additionally, Trump has positioned these tariffs as a strategy to reduce the trade deficit, protect American industries, and create new job opportunities.
Retailers like Steve Madden are already shifting their supply chains, reducing their reliance on Chinese imports by as much as 45% over the next year. These strategic changes may help mitigate the effects of the tariffs, though they are not a guaranteed solution. The process of finding alternative manufacturing sources takes time and resources, and higher costs could still be passed down to consumers in the interim.
As the Trump administration finalizes its trade policies, many retailers are preparing for the potential impact. Some, like Walmart, are optimistic about adjusting their supply chains and working with suppliers to maintain low prices, but the reality is that tariffs could lead to higher costs for certain goods. Consumers may start to notice the effects of these price hikes, especially in categories that rely heavily on imports from China.
CNBC, Axios, the Financial Times, and KOMO News contributed to this report.
