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Walmart (WMT) , like many other retailers across the country, is bracing itself for the impact of tariffs, which poses a major threat to future sales.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes.
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On March 4, Trump increased his previous 10% tariff on all goods imported from China to 20% and imposed 25% tariffs on all goods imported from Mexico and Canada.
Related: Walmart issues stern warning about unexpected customer behavior
Before these tariffs were enforced, Walmart Chief Financial Officer John Rainey warned in an interview with CNBC in November that Walmart might have to raise its prices as a result of tariffs, a move that can drive away low-income customers who are already battling inflation and higher costs of living.
“We never want to raise prices,” he said in the interview. “Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.”
Walmart makes a bold move to dodge impact of tariffs
It appears that Walmart is taking drastic measures to prevent higher costs from tariffs.
The retail giant has asked some of its suppliers in China, which includes those who produce clothing and kitchenware, to decrease their prices by up to 10% per round of tariff, according to a new report from Bloomberg. This essentially shifts the burden of tariffs onto those suppliers.
Walmart is allegedly negotiating with each individual manufacturer, and the price cuts vary per firm.
The move from Walmart comes after the retail giant has decreased its reliance on Chinese imports over the past few years. In 2023, 60% of Walmart’s merchandise was imported from China, down from 80% in 2018.
Walmart’s products are also sourced in America, Mexico, Vietnam, India, Cambodia and the Dominican Republic.
Amid the looming threat of tariffs, Walmart revealed in its latest earnings report that it expects its net sales to only increase by 3% to 4% and its operating income to rise by 3.5% to 5.5% for the year, falling short of investor expectations.
Related: Best Buy CEO has stern warning for customers
During an earnings call on Feb. 20, Rainey said that the company’s weaker guidance is based on its acknowledgment that it is operating during “an uncertain time.”
“Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” said Rainey during the call.