Big box grocers like Target and Walmart, who are already struggling with a decline in sales, might not see an end to their problems any time soon — and customers will be paying the (increased) price for it. President Donald Trump has put in to motion an increase of tariff rates and it is bound to have a ripple effect across the entirety of the United States at large.
Price hikes incoming
President Trump’s second run in office has led to a massive tariff rate of 25% on goods imported from Mexico and Canada, and a 10% increase on goods brought in from China — not to mention how this almost started a trade war. Canada and Mexico have managed to reach an agreement with Trump to delay the tariff hikes for at least a month. The tariff increase on China, however, was immediately put in effect.
Retailers have already been facing continuous struggles in trying to consolidate low costs for customers with high inflation rates — and now this struggle is intensifying. David French of the National Retail Federation reiterated that “as long as these universal tariffs are in place, Americans will be forced to pay higher prices on everyday consumer goods.” The National Retail Federation represents a group consisting of the largest retailers across the States.
Top trade advisor to Trump, Peter Navarro shared at a Politico event that the aim of these increased tariffs is to gain more revenue through external sources like tariffs, rather than from taxes of citizens so as to “structurally shift the American economy.”
Fast fashion slowed down
China responded in kind to the raised tax fees with its own tariffs almost immediately. Gas, U.S. coal, and other items will now also face a 10% tax which will in turn impact U.S exports to the value of $20 billion. Additionally, $450 billion of Chinese goods are covered under Trump’s executive order.
These crackdowns are especially infuriating to Chinese officials as it blocks the channels used by fast-fashion brands like Shein and Temu to dominate American markets by undercutting local brands with shockingly cheap prices. These brands were using a loophole in the form of a legal doctrine called de minimis that allowed for packages with a value of under $800 to be shipped to the U.S duty-free.
Press Secretary Karoline Leavitt has shared that a call is being arranged between China’s president, Xi Jinping and Trump to discuss a way forward.
Consumers pay the price for economic unrest
John David Rainey, Walmart CFO, recently shared with CNBC that a price surge on certain items is now basically guaranteed. Rainey shared the company’s reluctance to increase prices and said, “Our model is everyday low prices, but there probably will be cases where prices will go up for consumers.”
It is still too early to know for certain which items will face a price hike at Walmart. However, according to Forbes, economists predict the tariffs imposed on China will lead to pricier smartphones, toys, data processors, video games, air conditioners, clothes, and other tech items.
Executives at Lowe’s have also shared that 40% of their inventory come from outside of the country. The automotive industry and other manufacturing fields are also showing concern that production will be halted and jobs will be lost as a result.
The U.S. Steelworkers Union shared with Reuters, “These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border.”
The temporary pause on the tariffs is not translating to a pause on price increases as Walmart shoppers are noticing changes in the pricing of goods at the grocer. A Facebook post shared just a few days ago read, “Walmart has one dozen eggs priced at $10.00. Price hikes have started,” with someone responding to it with “Only going to get worse.”
Consumers are understandably concerned but, unfortunately, at this point, only time will be able to tell if these price increases are here to stay or not.