Trump urges Walmart to absorb tariffs, not raise prices

US President Donald Trump urged Walmart to absorb tariff costs instead of raising prices on goods.

In a social media post, he criticized Walmart for linking price increases to tariffs, stating, “Walmart made billions of dollar last year, far more than expected.”

He told Walmart and suppliers in China to “eat the tariffs” rather than passing costs onto consumers.

Walmart, the world’s largest retailer, said it could not fully absorb tariff costs due to narrow retail margins.

CEO Doug McMillon assured that tariff-related expenses on general merchandise would not affect food prices.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Retail math makes “eating tariffs” nearly impossible for most stores

The call for Walmart to absorb tariff costs overlooks the fundamental economics of retail margins, which are remarkably thin across the industry.

Average retail profit margins range from 0.5% to 4.5%, making the absorption of significant tariff increases mathematically challenging without price adjustments 1.

When the U.S. imposed tariffs in 2018, research showed that a 10 percentage point increase in tariffs led to a 1.5% increase in producer prices and a 2.3% increase in prices for products using tariffed inputs 2.

For context, Walmart’s historical net profit margins hover around 2-3%, while the most recent tariff increases have pushed the average effective U.S. tariff rate to 17.8%, the highest since 1934 1.

The economic pressure is particularly acute for retailers selling goods in categories heavily sourced from China, where 80% of U.S. toys and significant portions of consumer electronics originate 3.

Studies consistently show that tariffs are effectively taxes that are primarily borne by domestic consumers rather than foreign exporters, with limited ability for retailers to shield customers from these costs.

2️⃣ Tariffs create a regressive tax burden that disproportionately affects lower-income households

The current wave of tariffs is projected to cost the average U.S. household approximately $2,800 annually in higher prices, according to Yale Budget Lab analysis 1.