Walmart, the world’s largest retailer, will have to start raising prices later this month due to the high cost of tariffs, executives said, in a clear signal that US President Donald Trump‘s trade war is filtering through to the American economy.
As a bellwether of US consumer health, accounting for around a quarter of US grocery spend, Walmart‘s explicit statement is also a signpost for how the trade war is affecting companies as Walmart is noted for its ability to manage costs more aggressively than other companies to keep prices low.
Retail industry observers agreed that Walmart is more insulated from tariff-induced cost increases than many of its competitors. Walmart’s large grocery business, much of which is sourced in the United States, limits the company’s reliance on imports, said analysts at Bank of America
However, a third of the goods it sells in the US come from other countries, with China one of its largest sources of imports.
US shoppers will start to see prices rise at the end of May and certainly in June, Walmart’s chief financial officer John David Rainey said in a CNBC interview.
“If you’ve not already seen it, it will happen in May and then it will become more pronounced,” Mr Rainey said of price hikes in an interview.
Walmart’s CEO Doug McMillon said the retailer was committed to ensuring that tariff-related costs on general merchandise – which primarily come from China – do not drive food prices higher.
“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,” he said. “The higher tariffs will result in higher prices.”
To mitigate the impact, Walmart is working with suppliers to substitute tariff-affected components, such as replacing aluminium with fibreglass, which is not subject to tariffs.
Despite these efforts, Mr McMillon noted that adjusting costs is more challenging in cases where Walmart imports food items like bananas, avocados, coffee, and roses from countries such as Costa Rica, Peru, and Colombia.
The grocery giant declined to provide a profit forecast for the second quarter, even as the company’s US comparable sales surpassed expectations in the first quarter.
Many US companies have either slashed or pulled their full-year expectations in the wake of the trade war, as consumers curtail their spending. Walmart’s statement, however, will resonate nationwide, as roughly 255 million people shop in its stores and online weekly around the world, and 90 per cent of the US population lives within 10 miles of a Walmart.
US consumer sentiment ebbed for a fourth straight month in April, signalling watchful purchasing, while the country’s GDP contracted for the first time in three years during the first quarter, fanning worries of a recession.
Still major economic indicators in April showed that tariffs had not pushed America off a cliff, a point noted by the White House in response to a question on Walmart’s price hikes.
“All recent inflation data – from consumer prices to producer prices – have come in below expectations. Meanwhile, private demand growth and job creation remain healthy,” White House spokesman Kush Desai said.
“Through tariffs and more balanced trade deals, rapid deregulation, and massive tax cuts, the Administration remains committed to further reducing the cost of living,” Desai added.
Analysts said Walmart was better positioned than rivals as its scale enables it to lean on its suppliers and squeeze out efficiencies to shield customers from tariffs, but only so much.
“There will likely be some demand destruction from tariffs, a complete wreck is unlikely,” said Brian Jacobsen, chief economist at Annex Wealth Management. – Reuters/Bloomberg/ New York Times/Financial Times Limited 2025
