Retailers and consumers alike have nervously watched as President Trump introduced sweeping tariffs upon his return to office. While some tariffs are on a temporary pause, such as the recent 90-day pause on goods imported from China, there’s no telling how things will play out.
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Costco is taking a different approach to managing the impact of tariffs on sourcing products for its stores. Here’s why CEO Ron Vachris isn’t bearish on how increased duties will harm the retailer.
Costco Believes It Can Still Find Deals
Part of what drives the popularity of Costco is its attention to providing attractive pricing to its members. The retailer can do this, in part, thanks to its willing base of customers who pay membership fees to access exclusive deals the company negotiates.
During Costco’s recent earnings call, Vachris communicated positivity that the retailer will still be able to negotiate deals. “With our flexibility of the treasure hunt, there’s not many items that we can’t find something to replace or something else to bring in,” said Vachris.
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This echoes previous sentiments expressed by Costco CFO Gary Millerchip, who indicated in December 2024 that the retailer would replace tariff-hit products with more affordable alternatives. Taken together, it’s clear Costco has been actively monitoring tariffs and is confident it can adjust course to locate economical products for its members.
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Sales Aren’t Dependent on Foreign Goods
Retailers that heavily depend on foreign imports are typically more concerned with tariffs. Those goods are imported to the U.S., with companies passing the increased cost onto Americans. Apple is one example, as 80% of Apple’s production takes place in China.
Costco doesn’t face such an exposure, allowing it to weather a potential storm with more ease. “About one-third of our sales in the U.S. are imported from other countries, and less than half of those are items coming from China, Mexico, and Canada,” noted Vachris during Costco’s earnings call. The reduced reliance on foreign sales allows the warehouse giant to act with more agility, not found at companies with heavy reliance on foreign goods.
Costco Has Power
Costco has significant power in the retail landscape. The company had roughly $250 billion in sales in fiscal year 2024. This gives the big box store the muscle to negotiate better deals for its members. Costco is already using this weight to require price cuts from its suppliers in China.