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AmextaFinance > News > Walmart falls back on familiar playbook to combat Trump’s tariffs
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Walmart falls back on familiar playbook to combat Trump’s tariffs

News Room
Last updated: 2025/04/10 at 11:31 AM
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The decorative cowboy boots and soccer balls covered in stars and stripes in Walmart’s superstore in Grapevine, Texas have a proudly American aesthetic.

But like thousands of other products in Walmart’s stores they are imported from China, meaning that when Walmart reorders them they will carry a 125 per cent tariff.

Tariffs represent a massive challenge for the largest US retailer, but at a much anticipated investor event in Dallas this week that was overshadowed by questions over the fallout from President Donald Trump’s erratic trade war, Walmart’s executives sought to convince attendees that tariffs were an opportunity to win market share.

“We see opportunities to accelerate share gains and we’re maintaining flexibility to invest in price as tariffs are applied to incoming goods,” John David Rainey, Walmart’s chief financial officer, told the audience. 

Walmart is returning to the same playbook that has seen it win market share from supermarkets, big-box merchandisers, department stores and discount dollar stores during the inflation wave of the past few years.

The retail giant used its financial heft to secure favourable terms with suppliers and hold prices down, which kept its existing customers happy and attracted more middle-class shoppers, too.

Walmart navigated through the tariffs introduced by Trump on China during his first term in office, but Trump’s 2025 trade war is of an entirely different magnitude and far more unpredictable.

As attendees filed out of the formal presentations made by Walmart executives in a downtown Dallas hotel, to make their way on to buses for store tours, Trump announced he was pausing the imposition of tariffs by 90 days on countries willing to negotiate with the US.

The grace period leaves important Walmart supply bases, such as Vietnam, Cambodia and Bangladesh, subject to a baseline 10 per cent tariff.

However, Trump simultaneously increased tariffs again on China — one of the countries Walmart most depends on for imports to its US business.

Doug McMillon, Walmart chief executive, described the tariff situation as “fluid” and said that, as far as he knew, Walmart had not cancelled any orders from China as a result. However, he said he was prepared to reduce purchases in future.

“The rate of sale may change on certain items because of the way tariffs are playing out, and we will adjust that as we go,” he said.

McMillon said he had not spoken to Trump about tariffs in the past week. Asked if he had plans to, he said: “We’ll see how things go.” 

Walmart has had a successful year in which revenues swelled to more than $680bn — the most of any global company — and operating profits grew 8.6 per cent to $2.3bn. The retail giant’s share price reached a new high in February.

Analysts largely believe that Walmart is well placed to win in any trade war, because its scale means it can drive hard bargains with suppliers. A majority of its sales are also from groceries, which are more likely to be produced domestically than apparel or electrical goods. 

Walmart executives said two-thirds of the products it sells in the US are made, grown or assembled there.

Justin McAuliffe, research analyst at Gabelli Funds, a Walmart shareholder, said: “If something is not negotiated with China, that’s going to be a pretty significant headwind for Walmart on an absolute basis. But on a relative basis, Walmart is probably one of the best positioned to deal with tariffs.”

That is not to say Walmart is immune from the downturn tariffs might bring. Fears over the impact of tariffs on consumer spending have stripped more than $100bn from the retailer’s market capitalisation, even after its shares rebounded 9.6 per cent yesterday after Trump’s tariff climbdown. 

On Wednesday, Walmart reaffirmed its expectation that net sales growth would slow to 3-4 per cent this year, down from 5 per cent last year. The company also admitted profit was harder to forecast in the near-term, partly because it wanted to retain the flexibility to hold down prices, even if that meant lower profit margins.

McMillon stressed the need to keep prices low for the most basic goods, as well as seasonal items such as barbecues and patio sets that must sell so they do not pile up as inventory. 

Negotiations with Chinese suppliers, who suddenly find themselves under immense strain, are likely to be fraught. Walmart executives were last month called into a meeting with Beijing authorities over reports they were pressuring suppliers to cut prices in response to new US tariffs added in February and March.

Cameron Johnson, a Shanghai-based supply-chain expert at consultancy Tidalwave Solutions, believed room for negotiation would continue to be limited.

“We’re not talking about a couple of percentage points on tariffs you can kind of move around,” he said.

Additional reporting by Thomas Hale in Shanghai

Read the full article here

News Room April 10, 2025 April 10, 2025
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