Retail heavyweights torn over how to handle tariff pain
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Prices are going up, that's clear now — but the nation's biggest retailers are taking very different approaches to what they say on the impact of tariffs publicly.
Why it matters: President Trump's trade war is stirring echoes of the inflation that took hold of the economy just three years ago.
- Unlike the COVID era, the increase in prices was entirely foreseeable this time.
The big picture: Over the last week, the warning lights have started to flash.
- Walmart, the world's largest retailer, said last week it couldn't hold the line anymore and would have to raise some prices.
- Target said it would "offset the vast majority" of tariff impacts to consumers and remain "price competitive."
- Home Depot doesn't plan to increase prices "broadly" because of tariffs, but said some items might disappear from store shelves.
- Those comments came after the CEOs of all three met with Trump in April and warned the president that tariffs would soon lead to empty shelves, higher prices and shortages.
State of play: Trump has, for years, steadfastly insisted that Americans don't pay for tariffs — the costs, somehow, are absorbed overseas.
- But over the weekend, he demanded Walmart "eat the tariffs," which Treasury Secretary Scott Bessent acknowledged the company could only do for so long.
- It was, in its way, a concession of the reality that almost all of the tariff cost is borne domestically. (A reality backed up by the government's own data, per a recent Apricitas Economics note.)
Zoom in: Target and Home Depot both spoke about pricing this week, notably after Trump came down on Walmart.
- We don't see broad-based price increases for our customers at all going forward," Billy Bastek, Home Depot's executive vice president of merchandising, said Tuesday.
- Target was less certain: "We have many levers to use in mitigating the impact of tariffs and price is the very last resort," CEO Brian Cornell said Wednesday.
Between the lines: Zacks Investment Research analyst Sheraz Mian told Axios Twin Cities' Nick Halter he doubts Target will be able to fully absorb the tariffs.
- "They don't want to publicly acknowledge it and get into the unfavorable kind of political limelight by speaking the truth," Mian said.
The intrigue: Americans seem to only have a vague grasp of the mechanics of tariffs, even if they get the ultimate impact.
- A new report from consumer insights platform Zappi finds just 22% of people fully understand how tariffs affect the prices of goods — and only 20% think their household is ready to absorb those higher prices.
- But one way or another, they get something is coming — the latest University of Michigan consumer sentiment survey found year-ahead inflation expectations surging to 7.3%, the highest since the early 1980s.
- "If these pre-tariff strategies have run their course, we're about to see some changes in prices, and then we're going to learn how consumers are going to respond to that," Atlanta Fed president Raphael Bostic told reporters at a conference this week.
The bottom line: Customers may see certain items exiled from store shelves if they're impacted too much by tariffs.
- "There'll be some things that don't make sense that just end up going away," Home Depot's Bastek said.
