Walmart said this week that it may be forced to raise prices in its stores as a result of Donald Trump’s tariffs on Chinese goods. The world’s largest retailer relies on Chinese products to help keep its prices low, according to USA Today. But the lack of progress in the trade war with China could force the company to jack up its famously low prices.
During an earnings call with reporters, the chief financial officer for the retail giant spoke about the challenges that the president’s tariffs present.
“We’re going to continue to do everything we can to keep prices low. That’s who we are. However, increased tariffs will lead to increased prices, we believe, for our customers,” he said.
The CFO didn’t discuss what items would be increasing in price, but half of the retailer’s sales come from food, which generally originates in the United States or South America. But 26 percent of its goods come from China.
This week, Trump announced that he was considering imposing tariffs as high as 25 percent on $300 billion in Chinese imports. This could impact clothing, furniture, sporting goods, and more. Last week, the president raised tariffs on $200 billion in Chinese goods from 10 percent to 25 percent.
In the U.S., Chinese imports account for 41 percent of all apparel, while 72 percent of all footwear comes from the country. A full 84 percent of travel goods are imported from China.
Walmart said that it hopes that the situation can be resolved without harming shoppers.
Though they haven’t addressed the tariffs, Target imports 34 percent of its goods from China, and retailers who sell sports equipment and auto parts rely even more heavily on Chinese goods. CEO of Macy’s Jeff Gennette said that it would be difficult for the retailer to keep prices low and not pass the costs of a tariff onto customers.
“If the potential fourth tranche of tariffs is placed on all Chinese imports, that will have an impact on both our private and our national brands,” he said.
Trump’s tariffs are equivalent to one of the largest tax increases in decadeshttps://t.co/w2OYV5qPUW— Rep. Don Beyer (@RepDonBeyer) May 19, 2019
Despite the news, Walmart had a strong showing for the first quarter. The retailer announced that online sales grew 37 percent, and the company recently announced plans to compete with Amazon’s Prime shipping with a one-day shipping service of its own, which is expected to goose its sales even further.
Sales at the company grew 3.4 percent overall, something that analysts attribute to the company’s decision to lower prices despite higher costs.
“Shoppers are now becoming more price sensitive, which plays into one of Walmart’s core strengths,” said one expert.