Time is running out for Walmart shoppers to avoid higher prices. The retail giant on Thursday warned that its products will become more expensive due to President Donald Trump’s tariffs being “too high.” “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” Walmart CEO Douglas McMillon said in an earnings call. The changes will likely take effect by the end of May, and prices will increase “much more” in June, Walmart’s finance chief, John David Rainey, told CNBC. Walmart, which has over 4,600 stores in the United States, gets merchandise from Canada, China, India, Mexico and Vietnam, among other nations. Those countries face at least 10% in tariffs, and imports of steel, aluminum, cars and auto parts face 25% tariffs. “All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact,” McMillon said. Trump increased tariffs on most Chinese goods to a whopping 145%, but that rate dropped to 30% on Monday as part of a 90-day truce with China. But Trump said the tariffs could become “substantially higher” if a trade agreement with China is not reached. Other countries are negotiating with the US amid a 90-day pause on reciprocal tariffs. Baseline tariffs will not go lower than 10% during negotiations, Commerce Secretary Howard Lutnick told CNN on Sunday. Economists have told CNN that the tariffs will burden lower- and middle-income Americans, who have historically been Walmart’s primary customer base. And consumers often go to the retail giant for non-negotiable purchases, such as groceries. Trump’s trade war has sunk consumer sentiment in recent months. The University of Michigan reported that consumer sentiment fell 2.7% between April and May — a near-record low, in part due to Americans fearing a recession. Food “Food inflation is very much on our mind,” McMillon said. Bananas, avocados and coffee are among some of the groceries that McMillon said come from Colombia, Costa Rica and Peru. America also imports beets, cabbage, melons, and pineapples from Costa Rica. Sweet potatoes and citrus are imported from Peru. Walmart did not say how much prices could increase on fruits and vegetables. “We’ll do our best to control what we can control in order to keep food prices as low as possible,” McMillon said, suggesting that “controlling the amount of fresh food waste” could help. Between February and April, the average price of bananas per pound has increased by about 2 cents at US retailers, according to the Bureau of Labor Statistics. Seasonal products Ryan Monarch, assistant professor of economics at Syracuse University, told CNN that seasonal and holiday shopping purchases can’t be delayed for two to three months to wait on the trade war to play out. Walmart is currently focused on back-to-school shopping, according to McMillon. He explained that tariffs are paid as soon as a product enters the country through customs, meaning the higher tariffs are already affecting shipments. “So I think what we’re looking at is upward pressure that began in April and plays through the entire year on things that are imported,” McMillon said. Estimating tariff costs and order quantities could “get more challenging” further down the line when making “decisions related to things like Halloween and Christmas,” he said. Toys, electronics and baby gear “China, in particular, represents a lot of volume in certain categories like electronics and toys,” McMillon said. Roughly 80% of toys sold in the United States are made in China, according to the Toy Association, an industry group. Toy companies, like Hasbro, the owner of Nerf and Play-doh, said some items will be cut from its portfolio, and Barbie creator Mattel has issued warnings about potential price hikes due to tariffs. “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally,” Trump said earlier this month, acknowledging the potential impact tariffs will have on toys. There has already been a jump in the price of toys. Product pricing analysis from research firm Telsey Advisory Groups showed that the price of a Barbie doll with a swimsuit sold at Walmart’s competitor Target rose 42.9% over a week in mid-April to $14.99. Gaming products should also see big price hikes. Initially priced at $450, Nintendo’s Switch 2 could instead cost around $600, according to experts. Even an Apple iPhone 17 could cost more than $1,000 instead of $799, according to Daniel Morgan, senior portfolio manager at investment firm Synovus. Childcare products, such as strollers, clothes, car seats and formula, could also see a price hike. Industry experts estimate that about 90% of children’s and baby gear products are manufactured exclusively in China, and that won’t change anytime soon. “Customers need those things. Even if they were to raise prices on those products, customers are still going to buy them,” Syracuse University’s Monarch said. “So you might expect products like that to see prices increasing pretty quickly.” Home goods In 2024, China sent more than $438 billion worth of goods into American homes. Nearly 19% of that total was machinery and mechanical appliances, according to data from the US International Trade Commission. Meanwhile, 4% of last year’s imports from China were bedding, furniture and lighting. Rainey, Walmart’s CFO, said general merchandise sales in the United States declined slightly during the first quarter, “with softness in electronics, home products and sporting goods.” Because home goods are not considered necessities like groceries and baby gear, consumers are more likely to hold off on buying them. “Consumers are very worried, and what they’re doing is they’re delaying their purchases of durable goods — things like cars, things like appliances,” said Monarch. Monarch added that Walmart was among companies to increase imports before tariffs took effect, allowing them to stock up on products that won’t perish.
Here’s what tariffs could make more expensive at Walmart
TruthLens AI Suggested Headline:
"Walmart Warns of Price Increases Due to High Tariffs"
CNN
7.6
TruthLens AI Summary
Walmart has issued a warning to its customers about impending price increases on a range of products due to elevated tariffs imposed by President Donald Trump. CEO Douglas McMillon stated that while the company will strive to keep prices low, the current tariffs are too high for Walmart to absorb entirely, especially given the tight margins typical in retail. The price hikes are expected to become noticeable by the end of May, with a more significant increase anticipated in June. Walmart, which relies on imports from countries including China, Canada, and Mexico, faces tariffs of at least 10% on many goods, with certain items like steel and automobiles facing tariffs as high as 25%. McMillon indicated that the tariffs on Chinese goods, which had risen to 145% but were reduced to 30% under a temporary truce, pose the most substantial cost pressure on the company. A lack of a long-term trade agreement could lead to even higher tariffs in the future, affecting consumer prices across various categories.
The impact of these tariffs is expected to be felt most acutely by lower- and middle-income consumers, who form the core customer base for Walmart. As food prices continue to rise, McMillon noted that essential items such as bananas, avocados, and coffee, imported from various countries, might see increases without a clear indication of how much prices will rise. Seasonal and holiday shopping is also likely to be affected, particularly as Walmart gears up for back-to-school sales. The company has already experienced upward pressure on prices since April, which is expected to continue throughout the year. Additionally, toys and electronics, categories heavily reliant on Chinese manufacturing, are predicted to see significant price hikes, with industry experts suggesting that prices for popular items like the Nintendo Switch and Apple iPhones could rise substantially. Overall, the ongoing trade tensions and resulting tariffs are likely to complicate Walmart's pricing strategies and impact consumer purchasing behavior across multiple product categories.
TruthLens AI Analysis
The article highlights the potential impact of tariffs on prices at Walmart, specifically due to the recent increases in trade tariffs implemented by the Trump administration. The CEO and finance chief of Walmart express concern about the inability to absorb the costs associated with these tariffs, indicating that consumers will likely face higher prices on everyday goods.
Economic Implications for Consumers
The article emphasizes that the rising costs are expected to affect lower- and middle-income Americans the most, who constitute Walmart's primary customer base. This aligns with broader economic concerns where consumer sentiment has been negatively impacted by trade tensions and fears of a recession. As a major retailer, Walmart's price changes can significantly influence consumer purchasing behavior, particularly for essential items like groceries.
Perception Management
There seems to be an effort to communicate the challenges that Walmart faces in maintaining low prices amidst rising tariffs. This could be interpreted as an attempt to prepare consumers for forthcoming price increases while positioning Walmart as a company that is trying to do its best under difficult circumstances. By highlighting the impact of tariffs, the narrative may evoke sympathy from shoppers who may feel the pinch of rising costs.
Potential Omissions
While the article focuses on the immediate implications of tariffs, it may overlook the underlying factors contributing to these trade policies and their long-term effects on the economy. For instance, the broader geopolitical context and the implications for international relations are not discussed, which could provide a more comprehensive understanding of the issue.
Comparative Context
When comparing this article to others on trade and tariffs, there is a consistent narrative around the detrimental effects of tariffs on consumer prices. This could suggest a coordinated media approach to highlight the negative consequences of current trade policies. The coverage often reflects concerns among economists about the potential recessionary effects of such tariffs.
Impact on Markets
The news may influence investor sentiment, particularly in sectors that are dependent on retail sales. Stocks of companies like Walmart could be impacted as investors assess the potential for reduced consumer spending due to higher prices. Additionally, other retail companies may see similar effects if consumers react to price increases by cutting back on spending.
Geopolitical Relevance
The discussion of tariffs ties into larger themes of international trade relations, especially with China. The ongoing negotiations and potential for increased tariffs if no agreement is reached could have significant implications for global markets and economic stability.
Use of AI in Reporting
It is unlikely that AI played a direct role in crafting the article, as the content reflects a human perspective on economic issues and consumer sentiment. However, AI tools could have been utilized in data analysis or trend monitoring to inform the article's context, particularly in gathering statistics related to consumer sentiment and economic indicators.
This article presents a reliable account of Walmart's response to tariff pressures and the expected impact on prices. It effectively communicates the challenges faced by the retail giant while also hinting at broader economic implications for consumers.