Fighting words: What does Walmart and Trump’s tussle on tariffs mean for manufacturers and other retailers?

President Donald Trump opened a new front in his trade war over the weekend – taking aim at Walmart with a message for retailers, manufacturers and other businesses more broadly: Don’t pass higher costs from the tariffs to consumers.

“EAT THE TARIFFS,” and do “not charge valued customers ANYTHING,” Trump posted on this Truth Social account May 17.

His post came days after Walmart CEO Douglas McMillon said in the company’s first quarter earnings call that the retail, which is famous for its everyday low prices, might have to charge shoppers more for food and other goods to offset the impact of tariffs.

“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,” McMillon explained to investors during a sales and earnings call May 15.

Trump responded that “Walmart should STOP trying to blame Tariffs as the reason for raising prices through the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected.”

He warned that he would be watching, “and so will your customers!!!”

While Trump’s post was directed at Walmart, the message could apply more broadly to retailers and businesses, many of which are grappling with higher input costs, snarled supply chains and “whiplash” due to the ongoing trade war.

Walmart’s earnings grow as consumers flock to the retailer for ‘everyday low prices’Trump’s assessment reflects Walmart’s strong growth, including in its most recent quarter.

The company’s first quarter earnings reported Thursday came in around consensus estimates with revenue up 2.5%, or 4% in constant currency, to $165.6 billion, and operating income up 4.3%, or 3% in constant currency.

Year-over-year comparative US store sales increased 4.5%, which was better than the predicted 3.9% increase and which reflected higher transaction counts and unit volumes as well as strong growth in eCommerce, the company reported.

Walmart attributed the gains to strong growth in health & wellness and grocery.

They also reflect an increase in the number and types of consumers shopping at Walmart. For example, higher income shoppers have flocked to the retailer in recent years. The retailer’s value proposition and promise of lower prices than many competitors make it attractive to shoppers trying to stretch their budgets amid ongoing inflation and now tariff-related price hikes.

In August 2024, the company rolled back prices for 7,200 items, including food – a change that generated “higher engagement across income cohorts,” led by “upper income households … even while we grow sales and share among middle and lower income households,” CFO John Rainey, noted in the company’s second quarter earnings report in the previous fiscal year.

To keep prices at its stores lower than competitors, Walmart at the time pushed back against brand manufacturers passing higher costs through to consumers. Instead, it encouraged branded manufacturers to invest more in lower prices.

Walmart commits to treating suppliers ‘well’The retailer appears to be changing its tune slightly. Even though company leaders reiterated Walmart’s commitment to keeping everyday prices low, McMillon also said in last week’s earnings call that “treating our suppliers well is a priority.”

While he did not mention how Walmart will approach price negotiations with manufacturers and other suppliers, he noted, “We’ve worked with most of these companies for many years and we will be doing business together for many years to come. So, we will have that longer-term mindset as we work together through this year.”

The impact of tariffs on WalmartWalmart is partially insulated from the full-brunt of Trump’s tariffs because two-thirds of what it sells is made, assembled or grown in the US, McMillon said.

“Last year, we purchased $265 billion in the United States, and we made a commitment back in 2021 to add another $350 billion in incremental US volume over the following 10 years,” he explained.

“We recently announced additional support for US businesses in the form of Grow With Us, which will provide small businesses in the US with education, training and resources they need to help them get started with us,” he added.

McMillon said that nearly 60% of Walmart suppliers are US-based small businesses.

However, he added, Walmart does merchandise products from all over the world, including from China, Mexico, Vietnam, India and Canada.

“All of the tariffs create cost pressure for us,” which began in late April and “accelerated in May,” he added.

Can Walmart keep food prices down?Recognizing that food is a strong foot-traffic driver and many Americans are frustrated by rising grocery prices, McMillon said Walmart wants to keep its food and consumables prices as low as it can.

“Food prices in the US have gone up in recent years and our customers have been feeling that all along. We won’t let tariff-related cost pressure on some general merchandise items put pressure on food prices,” he said.

“But,” he added, “as it relates to food, tariffs on countries like Costa Rica, Peru and Columbia are pressuring imported items like bananas, avocados, coffee and roses.”

He reiterated that Walmart will “do our best to control what we can control in order to keep food prices as low as possible,” including controlling the amount of fresh food waste.

In some areas, Walmart is “eating the tariffs.”

McMillon noted that the retailer is “holding our retails where they are despite the tariff cost pressure.” For example, on flowers for Mother’s Day at Sam‘s Club in the US.

“In some cases,” he added, “we’ll absorb costs within a category or department and not simply pass on a tariff cost attributable to each item individually. We’ll be managing mix across items, categories and businesses.”