Walmart (WMT) is testing Treasury Secretary Scott Bessent’s theory that tariffs are unlikely to raise inflation because China will “eat any tariffs that go on.”
The world’s biggest retailer is asking some Chinese suppliers to cut prices to effectively shoulder the burden on President Trump’s tariffs, Bloomberg reported. Citing unnamed sources, the news provider said the U.S. retail giant was asking suppliers of items including kitchenware and clothing for reductions of up to 10%.
However, Walmart’s ‘Everyday Low Prices’ strategy that keeps prices down for consumers means it’s already procuring goods about as cheap as is viable for suppliers, it seems. Few of those asked to reduce prices have agreed, Bloomberg said.
It comes after the U.S. imposed an extra 10% duty on Chinese imports, on top of the 10% tariff levied by the White House on the country on February 4th. According to the administration, this will not raise inflation.
Speaking to CBS on Sunday, Treasury Secretary Bessent said, “China will pay for the tariffs because their business model is exporting their way out of this inflation,” adding, “They will eat any tariffs that go on.”
Trump Tariffs Probably Will Raise Prices
Walmart’s push to cut prices from suppliers indicates clear concerns about tariffs pushing up prices for U.S. consumers.
The retailer guided for slightly softer-than-expected revenue growth this year in part because of consumer concerns around inflation and tariffs. Meanwhile, recent surveys have shown U.S. consumer confidence sliding as inflation expectations rise off the back of an expected impact from tariffs.
The Yale Budget Lab estimates that tariffs as will push up PCE inflation by 1-1.2%, after modelling the total effect of the 25% Canada and Mexico tariffs and the 20% China tariffs.
The potential impact is not escaping consumers in the U.S. Last month the University of Michigan reported five-year inflation expectations rose from 3.2% in January to 3.5% in February, the highest in 30 years and the largest month-over-month increase since May 2021. Meanwhile the Conference Board reported the largest monthly drop in its consumer confidence survey since August 2021.
In addition to Walmart, other U.S. retailers have been sounding a cautious note on 2025, partly due to tariff concerns. On Tuesday Target (TGT) warned February sales were soft and it expects a rough first quarter on “ongoing consumer uncertainty” amid concerns about tariffs. CEO Brian Cornell said consumers would likely see higher prices in the coming days due to the tariffs on Mexican goods, while also indicating that the retailer was speaking with vendors about pricing.
The National Retail Federation, which represents the likes of Target and Walmart, said this week that “as long as these tariffs are in place, Americans will be forced to pay higher prices on household goods.”
Is WMT a Good Stock to Buy?
Overall, Wall Street has a Strong Buy consensus rating on WMT stock, based on 28 Buys and one Hold. The average WMT price target $112.33 implies about 17% upside from current levels.
