Impact of Tariffs on Walmart Pricing
WASHINGTON (AP) — Treasury Secretary Scott Bessent acknowledged Sunday that Walmart, the largest U.S. retailer, may pass along some of the costs from President Donald Trump’s tariffs to its shoppers through higher prices.
Bessent described his call with the company’s CEO a day after Trump warned Walmart to avoid raising prices due to the tariffs and vowed to keep a close watch on the retailer’s actions.
Concerns About Economic Leadership
As doubts persist about Trump’s economic leadership, Bessent dismissed inflation concerns and praised the uncertainty created by Trump as a useful negotiating tactic in trade talks. He addressed the recent downgrade of U.S. government debt by Moody’s Ratings, suggesting it was not as concerning as experts claimed.
Nevertheless, it appears Walmart is not inclined to fully absorb the tariff costs, despite Trump’s insistence that both Walmart and China should do so.
Conversations with Walmart Leadership
Bessent reported that he spoke with Walmart CEO Doug McMillon on Saturday, emphasizing in various media interviews that a key factor for Walmart customers is the current decline in gasoline prices. According to AAA, gasoline is averaging around $3.18 a gallon, slightly down from last year but has recently risen.
“Walmart will be absorbing some of the tariffs, but some may be passed on to consumers,” Bessent stated on CNN. “Overall, I would expect inflation to remain consistent. However, I understand why consumers may feel anxious after the inflation spikes they experienced over the years during Biden’s presidency,” referring to the peak inflation rate in June 2022, which reached a four-decade high as the economy struggled to recover from the pandemic and grappled with the fallout from the war in Ukraine.
Walmart’s Response to Tariff Challenges
Walmart did not comment on Bessent’s characterization of his conversation with McMillon. However, in a social media post on Saturday morning, Trump explicitly advised Walmart not to increase prices to compensate for the new tariff costs. “I’ll be watching, and so will your customers!” he posted.
Bessent noted that during Walmart’s earnings call on Thursday, the retailer was required by federal regulations to present a worst-case scenario to avoid potential lawsuits, implying that he believes the anticipated price increases would not be drastic.
In contrast, Walmart executives indicated last week that price increases began surfacing in late April, with a noticeable acceleration this month.
Challenges of Maintaining Low Prices
“We’re committed to keeping prices low, but there’s a limit to what we can handle, just like any retailer,” Walmart Chief Financial Officer John David Rainey remarked to The Associated Press on Thursday.
Bessent argued that the recent ratings downgrade was a “lagging indicator,” as financial markets had already accounted for the implications of the federal debt, which is around $36 trillion. He acknowledged that Trump’s proposed tax plan is projected to add approximately $3.3 trillion to the deficit over the next decade, with a $600 billion increase anticipated in 2027 alone, according to the Committee for a Responsible Federal Budget.
Evaluating Economic Growth Predictions
Bessent maintained that the deficits were manageable because the economy is expected to grow at a faster rate than the increase in debt, which would reduce its relative size concerning the overall economy.
However, many independent analysts are skeptical of the administration’s assertions regarding achieving an average growth rate of 3%, primarily since Trump’s 2018 tax cuts didn’t fulfill those expectations. Although those cuts initially stimulated economic growth before the pandemic, they concurrently raised budget deficit estimates provided by the Congressional Budget Office.
Status of Tariff Negotiations
On tariffs, the Trump administration is in the process of determining rates in discussions with approximately 40 major trading partners. This comes in advance of a July deadline. Furthermore, the administration is engaging in preliminary discussions with China, recently agreeing to reduce previous tariffs from 145% to 30% to facilitate ongoing negotiations.
Bessent conveyed that small business owners’ concerns regarding the tariffs likely stemmed from the originally higher rates imposed on China. Nonetheless, the current uncertainty in the market continues to pose significant challenges for consumers and businesses trying to formulate spending strategies in the coming weeks, months, and years.
Strategic Uncertainty as a Tactic
“Strategic uncertainty is a negotiating tactic,” Bessent explained. “If we disclose too much certainty to the other countries, it could undermine our position during negotiations.”
Bessent participated in discussions on prominent shows such as NBC’s “Meet the Press” and CNN’s “State of the Union,” sharing insights on these pressing economic issues.
