MENU

Reason.com

Free Minds & Free Markets

Walmart Shoppers Could Be Next Victims of Trump's Trade War

Walmart warns the Trump administration it may be forced to raise prices in response to tariffs.

Ken Wolter/Dreamstime.comKen Wolter/Dreamstime.com

While President Donald Trump's previous rounds of tariffs mainly targeted industrial imports, his latest duties will directly affect consumer goods. Walmart, the world's largest retailer, has warned the administration it may be forced to raise prices as a result.

On Monday, the Trump administration escalated its trade war with China, announcing tariffs on $200 billion worth of Chinese imports. The 10 percent tariffs take effect on September 24 and rise to 25 percent on January 1. As Reason's Eric Boehm noted, these new tariffs will likely mean price increases for computers, tablets, video games, vacuum cleaners, furniture, children's toys, and many other household goods sold by major retailers such as Walmart.

More than a week before the White House announced the new tariffs, Walmart warned the administration it was a bad idea. "The immediate impact will be to raise prices on consumers and tax American business and manufacturers," the company wrote in a letter to U.S. Trade Representative Robert Lighthizer, according to CNN. "Either consumers will pay more, suppliers will receive less, retail margins will be lower, or consumers will buy fewer products or forgo purchases altogether."

The Wall Street Journal reports that tariffs, including the latest round, now affect 11 percent of all U.S. imports and roughly half of the country's trade with China. "Given that Walmart was such a huge source of cheap products for low-income customers over the years, this really hurts the very people that Trump professes to help," Sucharita Kodali, a retail analyst at the research firm Forrester, told CNN. About 95 percent of U.S. consumers shopped at Walmart in 2016.

Appearing Tuesday morning on CNBC's Squalk Box, Commerce Secretary Wilbur Ross claimed that since the new tariffs are "spread over thousands and thousands of products," consumers won't "actually notice it at the end of the day." Former White House strategist Steve Bannon said today on The Economist Asks, a podcast produced by the magazine, that the tariffs mean "you may end up paying 5 percent more or 10 percent more for the junk you buy at Walmart."

If tariffs are supposed to encourage the purchase of American-made goods, it hardly makes sense to argue that consumers will barely notice them, as Boehm pointed out:

So which is it? Will consumers see higher prices and therefore behave as the Trump administration wants? Or will the tariffs have no effect on consumers, in which case they're disrupting international trade for nothing? Ross can't have it both ways.

Walmart's letter to Lighthizer shows that it's American companies and consumers who will pay for the trade war. And with the U.S. and China going tit for tat on tariffs, it's not likely to end anytime soon.

Bonus link: Writing for Reason, Scott Lincicome of Republicans Fighting Tariffs highlighted more than 200 U.S. businesses hurt by Trump's tariffs.

Photo Credit: Ken Wolter/Dreamstime.com

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • JeremyR||

    Or they should just tell the shareholders to expect slightly less money. But hey, that's impossible!

  • Paloma||

    Shareholders may then just sell their shares and invest their money in sonethung they consider more lucrative.

  • MWG||

    Because if there's one thing we know about shareholders, they NEVER sell when told to "expect slightly less money".

  • Agammamon||

    The vast majority of shareholders don't receive dividends. Even among those that do, business do not always pay out dividends - often the profits are rolled back into the business either as a buffer against bad times or to fund expansion.

    So if Walmart is making less of a profit then the value of those shares will decline so people will sell them off in the hopes of not taking a haircut. *Some* might hold on to them in the expectation that this is a temporary downturn though.

  • Agammamon||

    Also, Walmart, in a *spectacular* year, makes less than three percent net profit. Usually its under 2%. There's not a lot of leeway there to tell people 'well, you'll get a smaller dividend this year'.

  • AustinRoth||

    THE SKY IS FALLING!! THE SKY IS FALLING!!

    Ignore record employment, record low unemployment, record wages, record stock market, because TRUMP!!

    Dang, i should write for Reason. I got the shtick down.

  • Jerryskids||

    Or you could write for the anti-Reason - Ignore higher prices, because TRUMP!! You got that shtick down.

  • vek||

    The further into a recovery, the harder it is to keep rates up high... We're overdue for a recession as is, so that the economy is going this gang busters is surprising. If he can get up over 3% for full years, that is indeed impressive given our economic trajectory for the last 10+ years.

  • MatthewSlyfield||

    Of course the sky is falling. If it wasn't falling, it would drift off into space and then we'd be in deep shit.

  • Rev. Arthur L. Kirkland||

    Austin Roth has convened yet another meeting of Libertarians For Tariffs And Protectionism, although he may need to leave early to get to the meeting of Libertarians For Authoritarian, Bigoted Immigration Policies, followed by the meeting of Libertarians For Statist Womb Management.

    Right-wing bigots are among my favorite faux libertarians.

  • AustinRoth||

    You assume facts not in evidence, but smears are the modus operandi of the Left - "disagree with me on one thing means you must disagree on everything I believe in, and so I will ad hominem attack you."

    Just FYI - I am pro-choice; an atheist; but I do not believe in open borders (otherwise they are not borders, are they?) but for economic reasons, not bigotry; and yes, tariffs can be a good thing and have been used throughout the history of our country.

    And I am no fan of Trump, but I gladly accept him over Hillary, especially given his outstanding selections for the courts (lefty heads explode)

    You, on the other hand, are a well-known troll from many other boards, at least the ones that haven't banned you.

  • SQRLSY One||

    By odor of Der TrumfenFuhrer, Walmart must absorb the impact of the new TAXES on incoming goods from the EVIL Chinese laborers (who make a pittance of pay compared to American spoiled workers, but, hey, they are ANTI-Americans, these chinks, after all)... If the evil KKKorporate ogres of Walmart will NOT allow Der TrumfenFuhrer to COMMAND them to absorb these new taxes, and NOT pass them on to the loyal Trumpistas - consumers of America...

    Then Walmart is just EVIL!!!!

    (By odor of Der TrumfenFuhrer, Walmoart stockholders must become charitable donors as commanded by Government Almighty, as personified by Der TrumfenFuhrer).

  • vek||

    Nobody begrudges Chinese people having jobs... The only question is should we specifically engineer policies to throw OUR working class under the bus, to benefit foreign workers. This is an openly talked about plank of internationalist leftists. They believe we need to be taken down a notch, so that the rest of the world can be richer. They've basically done this... Are the working people in the industrialized world supposed to be happy that they were intentionally thrown under the bus?

  • Jerryskids||

    "you may end up paying 5 percent more or 10 percent more for the junk you buy at Walmart."

    Get a load of rich old Mister Moneybags over here! Hell, if I could afford to pay 5 or 10 percent more for my cheap crap I'd be shopping at K-mart!

  • Juice||

    Been to K-Mart recently? It wishes it was as high class as Wal-Mart.

  • Agammamon||

    I'd like to know where you've been to a K-Mart recently. They've been gone here for years.

  • Last of the Shitlords||

    Walmart Shoppers Could Be Next Victims of Trump's Trade War"

    "Could"...................

    Well shit, speculating about a potential minor price increase that may or may not happen is certainly grounds for a whole article. After all, gotta keep up that TDS, and those anti Trump virtues don't signal themselves.

    At least it gives Sarcasmic and the rest of the shrill 'tariffs are only good if they're leveled against America' crowd some fresh material for their spank banks.

  • Hugh Akston||

    'tariffs are only good if they're leveled against America' crowd

    So the Trump-supporters?

  • sarcasmic||

    Exactly, Hugh

    LotS, who do you think pays the tariffs? The Chinese?

    No, the tariffs on Chinese goods are paid by Americans.

    They are in fact taxes leveled against Americans.

    The people who have less money left to spend on other stuff after paying these taxes are Americans.

    The people who won't "save money and live better" because prices went up are Americans.

    The people who are victims of this self-imposed scarcity are Americans.

    How daft does one have to be to celebrate making stuff more expensive?

  • Dances-with-Trolls||

    Both the red and blue teams seem to be on it for some years now. (Price of energy shtick anyone?) I have always believed that the Great American Collapse wouldn't happen in my lifetime but lately I'm not so sure.

  • VinniUSMC||

    So sarcasmic, you were on board with the recent decrease in corporate tax rate, and the decrease in income tax rates?

    Or is it only indirect, possible tax increases that you are against? Because Trump.

  • sarcasmic||

    Tariffs are neither indirect nor possible.

    They are both direct and actual.

    I am against them because Adam Smith.

    They are bad economic policy no matter if it is Trump, the Tooth Fairy, or Jesus Christ himself who implements them.

  • VinniUSMC||

    Ah, so I see you believe in fairy tales.

  • sarcasmic||

    Do you have an argument, or just grade school insults?

  • ShotgunJimbo||

    I'm pretty sure LOT-shitlords is just an LC sock he gets on after he has embarrassed himself enough from lack of facts, logic, coherent sentences, etc. So he switches for a hot minute. Trump retard lemming.

  • loveconstitution1789||

    Says the buttpligger sock puppet.

  • ShotgunJimbo||

    I thought I was a Hihn sock according to the trump lemmings? Or is this buttpligger another one of Hihn's socks? I'm new here, it's hard to keep up with all of them.

  • loveconstitution1789||

    Does it matter which sock puppet you are?

  • sarcasmic||

    So which is it? Will consumers see higher prices and therefore behave as the Trump administration wants? Or will the tariffs have no effect on consumers, in which case they're disrupting international trade for nothing? Ross can't have it both ways.

    I think what Ross means is that consumer behavior will indeed change, but people won't notice that they are doing it. Prices change all the time. People will change their spending habits like people do every day when prices change. Just like the millions of Chinese who are passing on a lobster dinner because it costs a little bit more, and are instead eating kitten or whatever, Walmart shoppers will pass on Chinese trinkets and BUY MURKA instead, without understanding what they are doing.

  • I'm Not Sure||

    "Walmart shoppers will pass on Chinese trinkets and BUY MURKA instead..."

    MAGA, by bringing back jobs making cheap shit in America? Sounds like a plan!

  • sarcasmic||

    It's textbook Broken Window fallacy.

  • I'm Not Sure||

    What parent doesn't wish for their child a factory job making trinkets? MAGA, for sure.

  • sarcasmic||

    I know plenty of machine operators who make good money.

  • I'm Not Sure||

    People are always talking about how the Chinese workers who produce those low quality trinkets are practically working under sweatshop conditions. How is it, that American workers can expect to be paid big bucks for making the same cheap junk?

  • Don't look at me.||

    Well a decent living wage would help. Then they could afford the higher priced stuff.

    #15.00

    Am I doing this right?

  • sarcasmic||

    How is it, that American workers can expect to be paid big bucks for making the same cheap junk?

    Because Americans have access to much better machines that churn out more product. Remember that while manufacturing employment in this country is down, manufacturing output is at an all time high.

  • loveconstitution1789||

    Not higher production of more types of products.

  • vek||

    Here's the problem with the way you think about things I'm Not Sure:

    The argument was we sub out these garbage jobs, and then people move up to better jobs! That's free trade theory... Unfortunately reality has shown that this hasn't happened.

    We traded middlin' jobs making say $15 an hour manufacturing commodity items, for minimum wage jobs making coffee. MILLIONS of people know this, and have seen this first hand. It shows in the statistics too.

    By the time shipping and logistics costs comes into play, many imported goods are only 10-20% cheaper than making them here at higher wages. So if we move somebody from being unemployed, since we have the lowest labor force participation rate in decades, to making even suppressed wages of $12-15 an hour making widgets, or a barista has that same option even... We're on net better, potentially only paying nothing to a few percent more for the products.

    Free trade theory leaves out too many real world factors that contradict the way it works on paper. Unemployment, lower paying jobs NOT higher paying jobs replacing jobs lost from trade, accumulation of capitol to foreigners vs locals, etc. Trade is OFTEN good, but not in 100% of cases. Marginal instances where goods are only 25% or less cheaper are exactly the areas where we'd be better off producing here. If they can undercut us by 75% we should import.

  • buybuydandavis||

    "If tariffs are supposed to encourage the purchase of American-made goods, it hardly makes sense to argue that consumers will barely notice them, as Boehm pointed out:"

    Makes perfect sense. Just doesn't fit The Narrative.

    Usually we have to put up with Boehm's economic propaganda in his own articles here; now Reason is going to write articles quoting his garbage too?

    Depends on what percentage of the consumer price of the good comes in the wholesale cost of the good. It's that percentage, that goes up the percentage of the tariff, the costs of which are borne throughout the supply chain, and not merely at the consumer.

    Notice that Walmart, unlike Reason, is honest enough to make clear that the consumer doesn't bear the full cost of the tariff increase himself.

    Further, maybe a 10% rise in the price of a Chinese good causes a consumer to buy more of the US good priced 5% more. Or 1% more.

    You can get a huge swing in who we purchase goods from with a small swing in price.

    All it takes to understand these things is the most basic math, a modicum of intelligence, and the honesty to apply it correctly.

    And Boehm clearly doesn't have what it takes.

  • VinniUSMC||

    Yes, it's dishonest to assert that X% of tariffs will translate directly to an X% tax on American citizens.

    It's also dishonest to assert that the point of the tariffs is to change American consumer behavior.

  • sarcasmic||

    If taxes on imported goods purchased by Americans are not a tax on American citizens, who pays them?

    If the tariffs are to be used as a negotiating tool, as in to hurt foreign producers enough to force their governments to capitulate to Trump's will, then that means American consumer behavior must indeed change. That's the entire point: Make certain things more expensive so people buy less, which causes the producers to suffer.

    Dude, get your head out of your jar and learn some basic economics.

  • vek||

    All of that is true. It will tilt buying, and it will hurt China. The biggest factor would actually come from businesses, not necessarily consumer directly. If China goes up 25% they'll either switch to manufacturing here, OR perhaps India. It will be a cost on Americans in the short term, but if China breaks and opens up their market, which they would if we applied enough pressure... They don't have a choice, we can BURY them if we want to... But if they break, this will be a net benefit for people from here to eternity over the status quo.

    That you cannot accept that ANY short term pain is worth it for a long term gain of potentially being able to sell hundreds of billions a year in extra goods into their market is absolutely retarded and naive.

  • creech||

    So Trump's tax cuts are mere crumbs to Democrats but tax increases (tariffs) will really hurt.
    But Reps say the tariff taxes are mere crumbs but the tax cuts really helped.
    Funny how tax changes are perceived based solely on which Team imposed them.

  • loveconstitution1789||

    Tariffs impact different portions of the economy.

    Tax breaks help all sectors of the economy.

  • Scarecrow Repair & Chippering||

    Where do you get this nonsense?

    Tariffs ARE taxes, and all taxes can be as targeted as the bureaucrats want. You can slap tariffs on sugar and buttons just as easily as you can subsidize them or give them tax breaks or regulate them to a fare-thee-well. And guess what, you can do any or all of these steps independently or in combination.

    Your grasp of basic common sense is even weaker than I thought possible. Here's something which might help:

    Economics in One Lesson by Henry Hazlitt:
    The HTML version was updated in 1962 with up-to-date statistics and such, but those changes are minimally useful and certainly not necessary.
    The Foundation for Economic Education PDF version is cleaner and easier to read than other PDF versions.

  • loveconstitution1789||

    The fact that you cut and paste the same nonsense from the other day, tells everyone how ridiculous your gibberish is.

  • Scarecrow Repair & Chippering||

    *Copy* and paste, dipshit; the original remains.

    I suppose when you copy and paste your Trump bible, that shows the world how ridiculous Trump's gibberish is?

    How can any sane person think tariffs are not taxes? You'll have to tell us.

  • loveconstitution1789||

    I never said tariffs are not taxes, goofball. In fact, I am one of the first people to cite the definition of tariffs which describes it as taxes.

    You copy and paste nonsense.

    I copy and paste Constitutional and statute information. Figures that you cannot see the difference.

  • Scarecrow Repair & Chippering||

    I never said tariffs are not taxes


    Tariffs impact different portions of the economy.

    Tax breaks help all sectors of the economy.
  • VinniUSMC||

    What part of what you quoted makes the claim that tariffs are not taxes?

    Tariffs are a tax, but not all taxes are created equally. Income taxes directly affect the people. Corporate taxes indirectly affect the people, and are passed on to the consumer only insomuch as the consumer will continue to purchase products at increased prices. Tariffs are twice removed. The seller will try to get the buyer to pay more, to offset their loss. The buyer will try to get the consumer to pay more, also to offset their loss. There's no guarantee that the buyer will pay the full amount that the seller loses, and there's no guarantee that the consumer will pay the full amount that the buyer loses. So, a 10% tariff could be passed on fully as a 10% tax, or depending on the product, might not get passed on at all.

  • Scarecrow Repair & Chippering||

    If tariffs are taxes, then the two statements are in conflict. Either they both help all sectors of the economy, or they both impact different portions of the economy.

  • Scarecrow Repair & Chippering||

    In case these two quotes aren't clear enough, and to forestall and dipshittery about "tax breaks" vs "taxes" ...

    You can't have tax breaks without taxes. You cannot create any tax which has a single impact on the economy. regressive or progressive; targeted or general; all taxes affect people differently. By definition then, so do all tax breaks.

  • vek||

    Yup. Different taxes have different effects, some arguably better than others. Personally I'd be fine with replacing half the income tax with tariffs... Everybody would have the same amount of money, but that structure would encourage domestic production. Structure does matter.

  • Tony||

    How about Reason just affix "Republicans, oh my god I'm cumming" to the top of every comments thread and everyone whose opinion is essentially that just not bother?

  • Don't look at me.||

    Your hatred makes your ass looks big.

  • Tony||

    There is no ass as big as that belonging to the head of the Republican party.

  • VinniUSMC||

    How about Reason just affix "Democrats, oh my God I'm Trumping" to the top of every comments thread, and everyone whose opinion is essentially that just not bother?

  • VinniUSMC||

    If tariffs are supposed to encourage the purchase of American-made goods...

    If your made up baloney was true...

    Tariffs are supposed to encourage the Chinese government into freer trade. That is arguably not happening, yet, but stop trying to pretend the tariffs are supposed to change American habits. It's sad.

  • sarcasmic||

    How do they encourage the Chinese government into freer trade?

    Magic?

    No. They raise the price of Chinese goods, which encourages Americans to buy something else. This causes Chinese producers to suffer. This in turn pressures the Chinese government to negotiate a better trade deal. That's the theory anyway. And the entire fucking premise is that American spending habits must change as a result of the tariffs.

  • vek||

    You're an idiot.

    China is on the brink economically, without this trade issue. We could break them tomorrow if we wanted to. In short, we're the only nation that can buy as much shit as they need to sell to keep their economy going. We, on the other hand, have an entire world of poor nations to sub stuff out to if we want, let alone producing some stuff here. This leaves us with the upper hand. PERIOD.

    If we threatened 200% tariffs on 100% of Chinese goods tomorrow, the Chinese would break and give in to our demands of reducing barriers INSTANTLY. They'd have to. Otherwise they would have 10s of millions of people laid off overnight, be in a massive depression, and rioters in the street. They have no choice but to give in to our demands if we press them hard enough.

    THAT is how. Trump is turning up the heat slowly, but if he keeps doing it eventually they will have to crack. Their tariffs on our goods just don't have the ability to hurt us enough to break our economy, because we don't export that much to them, so they have no means to defend themselves in this trade war.

  • Star1988||

    Wilbur Ross is lying or he is an idiot. Bannon is precisely correct.

  • Richard Rider||

    The Left AND the trade protectionists believe that such higher costs will be largely absorbed by the [evil] profits that businesses make. Few realize how LITTLE profit is included in sales. ESPECIALLY in a narrow margin discount business such as Walmart.

    The typical American assumes that for every dollar they spend on goods and services, 15% is profit. Actually, that's the LOW END assumption. One study found that the assumption is 36%.
    http://riderrants.blogspot.com.....makes.html

    The average business profit on sales is 6-7%. But Walmart's profit margin on sales runs 3-3.5%. For every dollar spent, 3.5 cents is profit. Easy math -- look online at Walmart's P&L statements.

    Walmart's customers will have to pay any increase in costs -- not those cigar-smoking billionaires stereotyped by class war economic illiterates.

  • dsquaredoutlet||

    Assuming that there is such a thing as a country which has borders it may control is not the same as being afraid of anybody. But accusing someone of "fear" or "anger" is true believer shorthand for "shut up". I choose not to shut up.

    Why do Mexicans not open their country to Guatemalans? Mexico turns them back at the Mexico/Guatemala border, detains them and deports them or expedites their transit to the USA. Why can your beloved Mexico have a border while the the USA may not?

    marcelo burlon iphone case

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online