Walmart, the world’s largest retailer, is working to curb the impact of tariffs that have become the weapons of choice in President Trump’s trade disputes and are pushing up Corporate America’s supply costs.
“The potential future impact is difficult to quantify,” Chief Financial Officer Brett Biggs said Thursday, after the Bentonville, Ark.-based chain reported a 4.4 percent jump in inventory costs, which reached $95.6 billion in the three months through June. “We are closely monitoring the tariff discussions and are actively working on mitigation strategies, particularly in light of potentially escalating duties.”
While the effect of the tariffs on large U.S. retailers and other companies have been manageable so far, firms that are younger and smaller face greater challenges. Several — in regions of the country that supported Trump — have already announced job and production cuts, and economists, trade groups and even GOP lawmakers warn that duties on steel, aluminum and as much as $500 billion of Chinese imports threaten to undermine the benefits of last year’s widely-praised tax cuts.
The tariffs will “create a temporary drag” on the U.S. economy by the end of the year, with growth slowing to 2.7 percent in the three months through December from a previous projection of 3.1 percent, Seth Carpenter, an economist with Swiss lender UBS, predicted in a July report.
Trump has dismissed such concerns so far, promising trade deals that will benefit American workers, and the limited effects in corporate earnings reports from the three months through June may give him more maneuvering room.
Our Country was built on Tariffs, and Tariffs are now leading us to great new Trade Deals – as opposed to the horrible and unfair Trade Deals that I inherited as your President. Other Countries should not be allowed to come in and steal the wealth of our great U.S.A. No longer!
— Donald J. Trump (@realDonaldTrump) August 15, 2018
Some of the harshest duties have yet to take effect, though: Potential levies on $416 billion of Chinese imports and 25 percent duties on cars and vehicle components. The tariffs already in force include duties of 25 percent on steel imports and 10 percent on aluminum, 25 percent on $34 billion of goods from China, and up to 50 percent on washing machines. Trump has also doubled the metals tariffs on Turkey as he presses for the release of U.S. pastor Andrew Brunson, arrested after a coup attempt against President Recep Erdogan.
““We should seek free and fair trade, but this is just not the way to do it,” U.S. Chamber of Commerce President Thomas J. Donohue, whose organization is highlighting the trade war’s effects on individual states, has said. “It’s time to reverse course and adopt smarter, more effective approaches.”
One of the ways Walmart avoids damage from the duties – and the retaliation by both American allies and competitors – is buying most of the merchandise for its stores and e-commerce platforms locally, Biggs said, and the company is focusing on how higher costs affect its customers.
“We know questions persist,” he told investors Thursday. “We’ll do our best to update you on anything important related to tariffs in the quarters to come.”
