Trump Threatens Walmart Not To React to His Tariffs
On the bright side, at least Trump finally admitted his tariffs are, indeed, paid by Americans.
President Donald Trump growled at the world's largest retailer over the weekend, ordering it not to raise prices in response to his tariffs.
After weeks of saber-rattling between the United States and China, the countries agreed to a detente, during which American tariffs on China would come down to 30 percent (plus a 10-percent baseline), from as high as 145 percent. Still, that's higher than they were before the trade war, and Walmart—the U.S.-based retail giant with over $600 billion in annual global sales—cautioned last week that it may soon have to start raising prices as a result of Trump's trade barriers.
"Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain," Trump said in a post on Truth Social. "Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, 'EAT THE TARIFFS,' and not charge valued customers ANYTHING. I'll be watching, and so will your customers!!!"
In just a few short sentences, Trump's missive includes both an implicit threat against an American company and a fundamental misunderstanding of simple economics. At the same time, it suggests that he may know more about the effects of his own policies than he has let on in the past.
Walmart currently imports about 60 percent of its products from China, totaling $49 billion last year. With a flick of Trump's pen, Walmart must now pay an additional $15 billion just to import the same amount, and he insists the company should "eat" that cost.
The company actually imports less from China than in years past—as recently as 2018, the share was closer to 80 percent, whereas it has now diversified its supply chain and gets more from countries like Vietnam and India. But Trump also imposed tariffs of 46 percent on Vietnam and 27 percent on India, leaving the company little recourse.
And despite Trump's declaration that Walmart "made billions of dollars last year," a company's revenue means little without factoring in its costs.
For the first quarter of this year, Walmart reported a gross profit margin—meaning sales minus costs, without accounting for any other business expenses—of 24.2 percent. Even if Walmart wanted to, as Trump said, "eat the tariffs," it doesn't have room to absorb a 30-percent tax on all goods from China. (When factoring in other costs, Walmart's net profit margin falls to 2.75 percent.)
"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," Walmart CEO Doug McMillon told investors on an earnings call.
Trump's rebuke displays a type of economic illiteracy we most often associate with progressives: In 2022, Sen. Elizabeth Warren (D–Mass.) blamed high grocery prices on rapacious grocery store chains even as those same chains reported profit margins of less than 1 percent.
But Trump also showed an uncharacteristically accurate understanding of how tariffs work.
Throughout the 2024 campaign season, both Trump and his running mate, J.D. Vance, repeatedly said that tariffs were paid by other countries, not ours.
"A tariff is a tax on a foreign country," Trump told attendees at an August 2024 campaign rally. "That's the way it is, whether you like it or not. A lot of people like to say it's a tax on us. No, no, no. It's a tax on a foreign country."
"Our corrupt leadership said if you put tariffs on China, prices will go up," Vance said later that month. "Instead, Donald Trump did exactly that, manufacturing came back, and prices went down for American citizens. They went up for the Chinese, but they went down for our people."
This was a fanciful notion. Tariffs, by definition, are paid by companies that import goods, not by the countries that export them. And Trump's declaration that Walmart should "EAT THE TARIFFS" concedes that.
"Tariffs are fees companies pay the federal government to import certain products into the United States," wrote Shannon Pettypiece and Rob Wile of NBC. "If a big-box retailer, for instance, is importing sneakers from China, it must pay a tariff to Customs and Border Protection officials at a port of entry before it can bring the shoes into the country to sell at its American stores."
In that example, the retailer would then have a choice: absorb the extra cost of the tariff and make less money on the sale, or pass the cost on to the consumer by hiking the retail price of the sneakers. Some companies may opt for the former, but eventually they'll have no choice but to raise prices.
Obviously, it's an abuse of power for a sitting president to threaten a private company for raising its prices. It adds insult to injury that those prices are going up as a direct result of that same president's economic policies.
