According to Walmart’s Chief Financial Officer, John David Rainey, that’s exactly what the company is doing. Not surprisingly, they plan to increase costs on a number of items in response to higher tariffs on foreign imports. Instead, tariff wars with countries like Costa Rica, Peru and Colombia are raising costs repeatedly on necessities like bananas, avocados, coffee and roses. This decision addresses that increasing economic reality. The new retail landscape will be much different, but for consumers—especially in late May and in June—those changes will be felt immediately.
Our economy is one based on imports, and Walmart is arguably — and in many ways — the U.S. The company imports nearly all of the products it sells, with a heavy focus on China, Mexico, Vietnam, India and Canada among its top suppliers. Significantly, about a third of the items that Walmart sells in the United States are actually Made in the USA. This interplay between domestic and international goods is a key component of Walmart’s supply chain strategy.
In light of the current tariff situation, Walmart’s CEO, Doug McMillon, provided clarity on the company’s exposure to these tariffs. All of this comes on the heels of recent news that Walmart was hit with a mind-boggling 145% tariff on Chinese imports just last week. In an effort to mitigate these price increases, Walmart has taken proactive steps, including absorbing some of the higher tariff costs to maintain affordability for its customers compared to competitors.
“We’re trying to navigate this the best that we can,” – John David Rainey
Rainey acknowledged the daunting nature of the current economic landscape, stating, “This is a little bit unprecedented in terms of the speed and magnitude in which the price increases are coming.” In practice, tariffs on imports from most countries are now at or quickly approaching 10% ad valorem tariffs. This would lead to igniting price increases, particularly because much of our toys and electronics originate from China.
Walmart has appropriately positioned itself to weather this harsh environment. They’ve calculatedly reduced new product orders sizes to prepare for some big price increases from tariffs. Walmart has stuck to its full-year outlook despite the challenges, even after falling short of Wall Street’s quarterly sales targets. Its business model relies on getting and keeping wide price spreads versus the competition. This commitment sometimes means foregoing higher profit margins.
Notably, the retail sector is already preparing for a dynamic shift in pricing strategies. Without action, consumers may soon be staring down double-digit increases at the checkout line. Retailers have already begun to roll out these changes, and most grocery shoppers should expect to see them by late May, with additional changes possible in June. Walmart’s strategy highlights the deeper, often invisible impact that international trade policies have on the consumer products you encounter every day.