Walmart (WMT) , like many other retailers across the country, is bracing itself for the impact of tariffs, which poses a major threat to future sales.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes.
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On March 4, Trump increased his previous 10% tariff on all goods imported from China to 20% and imposed 25% tariffs on all goods imported from Mexico and Canada.
Related: Walmart issues stern warning about unexpected customer behavior
Before these tariffs were enforced, Walmart Chief Financial Officer John Rainey warned in an interview with CNBC in November that Walmart might have to raise its prices as a result of tariffs, a move that can drive away low-income customers who are already battling inflation and higher costs of living.
“We never want to raise prices,” he said in the interview. “Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.”
Walmart makes a bold move to dodge impact of tariffs
It appears that Walmart is taking drastic measures to prevent higher costs from tariffs.
The retail giant has asked some of its suppliers in China, which includes those who produce clothing and kitchenware, to decrease their prices by up to 10% per round of tariff, according to a new report from Bloomberg. This essentially shifts the burden of tariffs onto those suppliers.
Customers shop in the food aisle at a Walmart store in Secaucus, New Jersey, US, on Tuesday, March 5, 2024.Â
Walmart is allegedly negotiating with each individual manufacturer, and the price cuts vary per firm.
The move from Walmart comes after the retail giant has decreased its reliance on Chinese imports over the past few years. In 2023, 60% of Walmart’s merchandise was imported from China, down from 80% in 2018.
Walmart’s products are also sourced in America, Mexico, Vietnam, India, Cambodia and the Dominican Republic.
Amid the looming threat of tariffs, Walmart revealed in its latest earnings report that it expects its net sales to only increase by 3% to 4% and its operating income to rise by 3.5% to 5.5% for the year, falling short of investor expectations.
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During an earnings call on Feb. 20, Rainey said that the company’s weaker guidance is based on its acknowledgment that it is operating during “an uncertain time.”
“Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” said Rainey during the call.
Major big-box retailers follow in Walmart’s footsteps
Walmart isn’t the only retailer lowering its sales expectations this year due to tariffs.
Target (TGT) also revealed in its latest earnings release that it is predicting that its net sales this year will only increase by 1%, reflecting flat comparable sales growth.
During an earnings call on March 4, Target Chief Financial Officer Jim Lee said that the company’s sales predictions for 2025 reflect “a wide range of potential scenarios and uncertainty” in the market.
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“We’re going to be focusing on controlling what we can control,” said Lee during the call. “What we don’t know is potential consumer demand that’s across the board, based on how tariffs ripple across the economy, for instance. But we have that wide range for a reason.”
Best Buy (BBY) is also predicting that its sales will either remain flat or increase by a small 2% year-over-year in 2025 as customers continue to tighten their spending
“China and Mexico remain the number one and number two sources for products we sell, respectively,” Best Buy CEO Corie Barry said during an earnings call on March 4. “While Best Buy only directly imports 2% to 3% of our overall assortment, we expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.”
Consumers are already frustrated with their grocery bills
The lower sales expectations from retailers come amid a time when many consumers across the country already feel the brunt of inflated grocery prices.
The Consumer Price Index (CPI), which measures the monthly change in U.S. consumers’ prices, increased 0.8% for groceries between December 2024 and January 2025.
According to a new survey from LendingTree, 61% of Americans said that they have stressed about paying for groceries in the past month. Also, 88% said that they have adjusted their grocery shopping habits to keep their grocery bill low, an increase from the 85% from the same survey in 2022.
About 44% of Americans in the survey said they are buying more generic brands, while 38% said they are sticking to their food shopping lists and 29% said they are keeping a sharper eye on prices.
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