World News

Walmart says increased tariffs on Chinese goods will drive up its prices

Published on: May 20th, 2019

Company will try to obtain products from different countries and work with suppliers to blunt the impact of higher tariffs.

US retailer Walmart has announced that prices for shoppers will go up due to higher tariffs on imports from China, as it reported its best comparable sales growth for the first quarter in nine years. Walmart shares, which have gained 7% so far this year, rose 2.4% to $102.30 in pre-market trade.

President Donald Trump increased tariffs on $200b worth of Chinese imports to 25% from 10% last week. The move is widely expected to raise prices on thousands of products including toys, clothing and electronics. China retaliated on Monday, announcing it would raise tariffs on $60b of American-made imports.

Walmart chief financial officer Brett Biggs told Reuters that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers’ “costs structures to manage higher tariffs.”

Moody’s analyst Charlie O’Shea said the potential impact on Walmart and its shoppers (from tariffs) is limited by its food business. Its grocery operation, which includes fresh food, contributes roughly 56% to overall revenue. “We believe Walmart has the wherewithal both financially and via its vendor relationships to minimise the impact on both itself and its shopping base,” he said.

Jeremy Padawer, co-president and partner at Wicked Cool Toys, took to LinkedIn to share his views. ” Walmart has stepped up on tariffs,” he wrote. “Walmart communicating that it will raise prices IF a tariff is implemented on finished goods accomplishes three things – 1) It protects the manufacturer from doom. If manufacturers had to take on all tariffs by ourselves, we’d be destroyed. 2) It mitigates the American stock market downturn. Higher prices will allow some margin redemption by manufacturers and retailers despite lower consumer demand. 3) It HONESTLY communicates to the American consumer what to expect if tariffs are implemented.”

He continued: “It’s a tax. Taxes raise consumer prices. The key will be for all of us to treat it like a tax and not a profit centre. Let’s hope it doesn’t come to this.”

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