More U.S. retailers will follow in Walmart‘s footsteps and introduce price increases as a response to Donald Trump‘s sweeping tariffs, former CEO of Toys ‘R’ Us Gerald L. Storch told CNN on Thursday.
Why It Matters
Walmart CEO Doug McMillon announced this week during an earning call that the retail giant will raise prices on some of its items later this month “given the magnitude of the tariffs” imposed by the Trump administration on the U.S. trading partners.
The move is expected to affect millions of Americans. According to Walmart, 90 percent of American households shop at its over 4,600 stores across the country and on its website, with more than 150 million customers buying a range of its products in-store or online.
What To Know
At the moment, products imported to the U.S.—which include electronics and toys, as well as grocery staples like avocados—are subject to a baseline tariff of 10 percent. Washington and Beijing, which escalated their trade war last month, agreed this week to lower their reciprocal tariffs, though the U.S. is still charging a 30 percent levies on goods coming from China. That is down from 145 percent.
Experts have warned that these tariffs, which are effectively a tax imposed on imported goods, will inevitably increase costs for everyday Americans. Trump has defended his policies saying the tariffs will cause “some little pain” but in the long term will be “worth the price that must be paid.”
On Thursday, McMillon—who has previously met with the president to discuss tariffs—said that, even as they are now lower, tariffs are still too high—and it is impacting the cost of its goods.
“We can control what we can control,” he said. “Even at the reduced levels, the higher tariffs will result in higher prices.” McMillon did not specify which products will see higher price tags, and how significant these increases will be.
In an interview with CNN about Walmart’s announcement, Storch explained that the vast majority of Walmart’s products—about two-thirds or three-quarters of its sales, he said—are groceries and products produced in the U.S., which won’t be affected by the Trump administration’s tariffs.
But other categories, like toys, “are almost entirely sourced from overseas, and very heavily from China, which is the headquarters of the toy industry,” and will see cost increases for American retailers. When the price of these products go up, retailers are likely to pass it on to consumers.
“There are increases, for sure, coming, how much? We have to see,” Storch told CNN.
“If Walmart has to raise prices, everyone’s going to raise prices,” Storch added, mentioning that Americans are going to see higher prices “on those items that don’t have domestic substitutes,” including consumer electronics, heavily toys, and “a lot of home goods, hardline kind of products.”
According to the former CEO, those price increases will affect only “a percentage” of their shopping basket.
“Most of the food products won’t have that,” Storch said. “And that’s why some of what President Trump was saying was correct in that regard. Some of this and some of that, there will be increases, and decreases in other products.”
Newsweek contacted Walmart for comment by email on Friday morning, outside of standard working hours.
What People Are Saying
Chief Financial Officer (CFO) John David Rainey told The Associated Press on Thursday: “We’re wired to keep prices low, but there’s a limit to what we can bear, or any retailer for that matter.”
He told CNBC: “We’ve not seen a period where you’ve had prices go up this high, this quickly. We’re well equipped and experienced in dealing with price increases that are going up 2 or 3 percent, but not 30 percent.”
Walmart CEO Doug McMillon said: “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.”
What Happens Next
Storch pointed out that the doom and gloom scenario expected to unfold after Trump announced sweeping tariffs against the U.S. trading partners has not yet materialized. On Thursday, Walmart surpassed first-quarter earnings estimates, while falling short of quarterly sales.
“Look at today’s retail sales report, and it was actually fine,” he said. “Sales for the month of April were up 5 percent year-over-year, exactly as they were in March. Five percent—that is a very high number for retail sales, it’s actually the highest that it has been in years.”
While some of this spending may be related to customers trying to buy products before they get more expensive, Storch said that some of it is just “consumers spending the money they have in their pockets.”
Rainey told CNBC that Walmart did have a good quarter “in what is a pretty unpredictable and dynamic environment right now,” but said that the level of tariffs announced is “pretty challenging.”
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