The message from Walmart executives was clear: they will do everything in their power to keep prices low, but higher tariffs are indeed going to force the retail giant to raise prices. But as with the tariffs themselves, questions about exactly when prices will rise, how high they will go and which items will be affected are difficult to answer.
“We’re positioned to manage the cost pressure from tariffs as well or better than anyone,” said Doug McMillon, CEO of Walmart during a May 15 earnings call. “But even at the reduced levels, the higher tariffs will result in higher prices,”
McMillon expressed thanks to President Trump and Treasury Secretary Scott Bessent for recent progress — presumably the recently announced 90-day hold on the imposition of 145% tariffs on Chinese goods. “We’re hopeful that it leads to a longer term agreement between the U.S. and China that would result in even lower tariffs,” said McMillon. “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.”
Significant Sourcing from the U.S. Won’t Keep Prices Down
Walmart is indeed in a strong position to manage tariff-generated price hikes, which means that retailers lacking Walmart’s buying power and supply chain options — that is, the vast majority of them — are likely to be in even worse shape.
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More than two-thirds of what Walmart sells in the U.S. is “made, assembled or grown here, and in recent years, our U.S. percentage has grown,” said McMillon. “Last year, we purchased $296 billion in the United States and we made a commitment back in 2021 to add another $350 billion in incremental U.S. volume over the following 10 years.”
But even with its high volume of domestic sourcing, “the merchandise that we import comes from all over the world from dozens of countries,” said McMillon, with the largest markets being China, Mexico, Vietnam, India and Canada. “China in particular represents a lot of volume in certain categories like electronics and toys. All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact. The cost pressure from all the tariff-impacted markets started in late April and it accelerated in May,” he added.
Prices for Imported Foods Likely to Increase
McMillon acknowledged that higher food prices already have been putting pressure on consumers’ budgets. “First, we want to keep our food and consumables prices as low as we can,” he said. “Food prices in the U.S. have gone up in recent years and our customers have been feeling that all along. We won’t let tariff-related cost pressure on some general merchandise items put pressure on food prices.
“But as it relates to food tariffs on countries like Costa Rica, Peru and Colombia, [these] are pressuring imported items like bananas, avocados, coffee and roses,” McMillon noted. “We’ll do our best to control what we can control in order to keep food prices as low as possible. An example would be controlling the amount of fresh food waste.”
Walmart CFO John David Rainey expressed confidence in the retailer’s ability to weather this challenging time: “We’ve seen during periods of economic uncertainty in the past [that] we tend to gain share and come out the other side in an even stronger position,” he said during the call. “We expect this period to be no different. We’ll play offense and may opportunistically invest in areas to improve our value proposition. But we’re not fully immune from the financial impacts in the short term. We’ve done work internally to model various scenarios related to the ongoing trade policy discussions. These scenarios involve making assumptions about how long tariffs persist at certain levels versus coming down to some lower level once bilateral trade deals are completed.
“Should more progress on trade in the next several weeks be favorable, there could be [an] upside,” said Rainey. “If elevated tariffs remain in place for an elongated period, there would be downside risk. We will know a lot more in a couple of months, but we are equipped to manage this as well or better than other retailers.”
