Walmart Responds To Trump's Order To 'Eat The Tariffs'

Walmart has responded to President Donald Trump's suggestion that the company should fully absorb any cost rises that arise because of his tariffs.

In a statement to USA Today, Walmart spokesperson Joe Pennington said: "We have always worked to keep our prices as low as possible and we won't stop. We'll keep prices as low as we can for as long as we can given the reality of small retail margins."

The recent exchange between the president and America's largest private sector employer began when Walmart said it would need to raise prices in order to cope with the cost increases brought about by Trump's trade policies.

Trump criticized the company for "blaming" his trade policies, and said Walmart should be able to "EAT THE TARIFFS," rather than increase prices for customers.

Newsweek has reached out to Walmart via online contact form for comment.

Why It Matters

Despite the recent pause on the tariffs exchanged between the U.S. and China, retailers have warned that the high rates still in place will have a material impact on their operations, resulting in higher costs that they argue will need to be passed onto consumers.

However, the administration has maintained that foreign nation's producers will absorb any tariff-related costs, while criticizing companies for price increases and attributing these to the trade policies.

What To Know

The recent exchange between the president and America's largest private employer began when Walmart said it would need to raise prices in order to cope with the administration's trade policies.

Upon releasing its first-quarter earnings—which revealed a 2.5-percent year-on-year increase in revenue to $165.6 billion—Walmart warned that its future results could be affected by a number of factors, including foreign currency fluctuations, changes in global economic and geopolitical circumstances, as well as "tariffs and trade policies."

In a subsequent earnings call, CEO Doug McMillon thanked the president and treasury secretary for making "progress" on the trade negotiations, referencing the recent announcement by the U.S. and China of a temporary reduction in tariffs. For 90 days as of May 12, tariffs on Chinese imports will drop to 30 percent from 145 percent, with China dropping its rate on American goods to 10 percent from 125 percent.

However, McMillon added: "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."

In an interview with CNBC, Chief Financial Officer John David Rainey similarly said that tariff rates were "still too high" despite the reductions, adding that while Walmart is "wired for everyday low prices...the magnitude of these increases is more than any retailer can absorb."

On Saturday, Trump took to Truth Social to respond to Walmart's warnings and criticized the the company for "blaming" tariffs. "Walmart made BILLIONS OF DOLLARS last year, far more than expected," said Trump. "Between Walmart and China they should, as is said, 'EAT THE TARIFFS,' and not charge valued customers ANYTHING."

What People Are Saying

White House Press Secretary Karoline Leavitt, in response to a reporter's question on Walmart's warnings, said: "Well, first of all, the CEO of Walmart made those comments about the tariffs on an earnings call, where CEOs, I believe, are legally obligated to give the most dire warnings and forecasts to their investors and stakeholders. The reality is, as the president has always maintained, Chinese producers will be absorbing the cost of these tariffs, and that is why China was so quick to hustle to the negotiating table with the United States of America. They need our markets. They need our consumers."

Republican Senator Bill Hagerty said that Walmart's anticipation of price increases "assumes that tariffs all go up" during an appearance on CNBC's Squawk Box.

"To the extent that there is an increase, you've got the producer, you've got the shipper, you've got the middleman—the retailer—and you've got the consumer. All of them may bear some of that," he said.

Hagerty added that Walmart "has the broadest base of American clients there is. And I think they're going to be very careful about how they do this. I know that they've received some criticism from the president—I think they need to think hard."

Walmart CFO John David Rainey told CNBC that retailers would determine price increases based on a product's "elasticity of demand," and an evaluation of the price points at which these can still be sold. However, he said that doing so could lead to price hikes even for items that are not themselves subject to tariffs.

"We've not seen a period where you've had prices go up this high this quickly," he added. "We're well equipped and experienced in dealing with elasticities or price increases that are going up two or three percent, but not 30 percent. So understanding, by category and by item, what the demand is going to be is really important to making sure that you have the right amount of inventory in the right places at the right time."

What Happens Next?

Despite its concern over the cost impacts of tariffs, Walmart has maintained its full-year outlook, which forecasts net sales of $674.5 billion, up from $643 billion, alongside $29.5 billion in operating income.

Walmart CFO Rainey told CNBC that shoppers will likely feel the impact of the tariff-related price hikes toward the end of May and in June.