Trump Wants Walmart to Absorb Tariffs with Lower Profit Instead of Higher Prices

May 18, 2025

Overview

On May 17, 2025, President Donald Trump publicly directed Walmart, the largest U.S. retailer, to absorb the costs of newly imposed tariffs on imported goods rather than passing them onto consumers through price increases. This statement, made via Truth Social, followed Walmart’s announcement that tariffs would force price hikes on various products. The directive has sparked debate about the feasibility of retailers absorbing tariff costs, the role of corporate profits in trade policy.

Facts

On May 17, 2025, President Trump posted on Truth Social: “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”
Walmart CEO Doug McMillon stated on May 15, 2025, during an earnings call: “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.”
Walmart’s Chief Financial Officer, John David Rainey, noted on the same call that a $350 car seat made in China could see a price increase of $100 due to a 30% tariff on Chinese imports.
The Trump administration reduced tariffs on Chinese goods from 145% to 30% for a 90-day period starting in May 2025, following negotiations with China, which lowered its counter-tariffs from 125% to 10%.
Treasury Secretary Scott Bessent, on May 18, 2025, told CNN’s “State of the Union” that he spoke with McMillon, who indicated Walmart would absorb some tariff costs, though some may be passed to consumers.

Perspectives

President Donald Trump: Asserts that Walmart, given its substantial profits, should absorb tariff costs entirely to prevent price increases, aligning with his campaign promise to curb inflation and protect consumers. He emphasizes that retailers and foreign producers, like China, should bear the financial burden of tariffs.
Walmart (CEO Doug McMillon): Acknowledges the company’s commitment to low prices but argues that the scale of current tariffs, even at reduced levels, exceeds Walmart’s capacity to absorb fully due to narrow retail margins.
U.S. Treasury (Secretary Scott Bessent): Suggests Walmart will absorb a portion of tariff costs, as discussed with McMillon, but concedes that some costs may be passed to consumers. Bessent frames this as a balanced approach, prioritizing trade negotiations while addressing consumer price concerns.
Consumers (represented in responses to University of Michigan survey): Approximately 75% of respondents in a May 16, 2025, survey expressed concerns about tariffs driving inflation, reflecting widespread public anxiety about potential price hikes on everyday goods.
Retail Industry (via Walmart’s statements): Contends that tariffs disrupt supply chains and increase costs for imported goods, which constitute a significant portion of general merchandise. The industry warns that sustained tariffs could force broader price increases across retailers.
Economic Analysts (via primary statements in trade discussions): Argue that tariffs are typically paid by U.S. importers, not foreign producers, and that passing costs to consumers is standard practice in retail to maintain profitability, challenging Trump’s assertion that companies can fully absorb these costs.

Considerations

Retailers like Walmart, reliant on imported goods, face increased financial pressure from tariffs, potentially reshaping pricing strategies and supply chain decisions.
The directive to “eat the tariffs” highlights tensions between government trade policies and corporate profit obligations.
Short-term price stability may be achievable for some retailers, but long-term tariff policies could lead to sustained inflation, affecting low-income households disproportionately.
Trade negotiations, such as the 90-day tariff reduction with China, may mitigate immediate impacts but introduce uncertainty in global markets if unresolved.
Consumer sentiment, already wary of inflation, could further erode trust in economic leadership if price hikes materialize across retail sectors.
The precedent of pressuring corporations to absorb policy-driven costs may extend to other industries, potentially altering business-government dynamics.
Tariff-driven cost increases could accelerate efforts to localize manufacturing, though such shifts require significant time and investment.