During its Q3 earnings call last week, big-box retailer Walmart hinted it could hike the prices of several items it sells if President-elect Donald Trump’s tariff hikes are implemented. Walmart’s Q3 revenue jumped 5.5% on the back of a 27% growth in global e-commerce sales. Walmart CFO John David Rainey highlighted that the company doesn’t want to increase the prices of its products, but costs “will go up for consumers” for some items, without talking in detail about the specific items.
Rainey noted that 66% of Walmart items are manufactured, grown, or assembled in the US, and Trump tariffs won’t impact all those products. However, experts have reportedly stated that the pricing for clothes, toys, and electronics could see a big jump under Trump’s tariff rules, given that most of these goods are imported.
President Biden Retained Trump’s Tariff Hikes During First Term
Rainey highlighted to investors that Walmart has embarked on a journey to diversify the sources from which it imports goods. “We’ve been living under a tariff environment for seven years, so we’re pretty familiar with that,” he said. “Tariffs, though, are inflationary for customers, so we want to work with suppliers and with our own private-brand assortment to try to bring down prices.” Several economists think that Trump’s widescale tariff plans will reignite inflation, which has consistently dropped in the past few quarters after reaching record highs due to the US Federal Reserve’s historic monetary tightening campaign.
Trump implemented tariff hikes in his first term, imposing charges on imported solar panels and washing machines in early 2018. In the same year, he hiked tariffs on steel and aluminium imports. In mid-2019, the billionaire Republican announced a 10% import tariff charge on $300 billion worth of products manufactured in China. President Biden retained Trump’s tariff hike throughout his time in Office and further increased rates on an additional $15 billion of Chinese imports.
Trump’s Tariff Plans Will Cost US Families $1,700 Annually
In his second term, Trump plans to impose a 60% tariff on all Chinese imports and a 10% hike on all the $3 trillion worth of US imports. In a May report, the Peterson Institute for International Economics estimated that these new tariff rates will cost middle-class US families $1,700 annually. The non-partisan think tank projected that Trump’s trade proposals would cost consumers half a trillion dollars annually or 1.8% of the US GDP, which happens to be five times the cost of the US-China trade war led by Trump in 2018.
GlobalData managing director Neil Saunders reportedly said Trump’s tariff plans would trigger “an enormous headache” and add considerable overheads for retail. “Despite Trump’s assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves,” he said. “This means the cost of buying products from overseas, whether directly or as an input for manufacturing, would rise sharply.” Meanwhile, Economist Larry Summers pointed out that tariffs could lead to a rise in inflation again. “There is a very substantial risk that the president will attempt to implement what he talked about. If he does, the consequences are likely to be substantially greater inflation than what was set off by the excessive Biden stimulus,” Summers explained.
