Why should Walmart eat the tariffs? Isn’t China supposed to be paying?
Well, according to Dr. Google who is never wrong:
Walmart annual gross profit for 2024 was $157.983B, a 7.06% increase from 2023. Walmart annual gross profit for 2023 was $147.568B, a 2.65% increase from 2022.
So if anyone can afford it they can. However, I know how corporations work and if tariffs start cutting into that cancerous growth rate, they will simply take it out on staff by firing people, reducing hours, increasing workloads, reducing benefits, et cetera. It will never, ever come out of executive compensation or bonuses. That profit margin is sacred and will never be touched.
That’s gross profit, not net. Big difference.
From the latest 10k (released in March):
Whether Walmart can eat it isn’t really the point though. Trump told us the tariffs will be paid for by other countries, not by Americans. Now he’s telling Walmart to eat the costs that he previously promised China would eat. He’s causing this problem and trying to deflect the blame to other parties.
And even if Walmart “eats it”, that’s basically a tax on their shareholders. Who include almost every American with a retirement plan.
As @JohnT noted, net profit matters more. More importantly, for this discussion, is the net profit margin which is 2.75%.
That’s saying that their markup on what they’re buying is only - over the average of all products - around 2.75%, taking into account also their own operating expenses.
Tariffs under 2.75%, in theory, they could eat rather than say investigating in growth and future looking initiatives. Anything over that and they’ve got to cut people or raise prices.
2.75% is already a tiny margin and their whole business model revolves on reducing costs and improving efficiency. It seems unlikely that they’re staffing much past subsistence so cutting headcount and staying operational are probably not both possible. They would likely need to shutter locations.
Comment from Wal-mart:
JP Morgan has chance of recession at 60%.
A little import/export anecdote.
As posted elsewhere in the thread the impact of tariffs, and the uncertainty, is that US ports are parking lots and container shipping lines have blanked (cancelled/redirected) sailings. Numbers like 60%+ reduction in trans-Pacific container volumes have been indicated. Which will drive vacant retail shelf-space.
Today we got notification from our international shipping co-ordinators of the prospect of container shortages. Now if containers aren’t going from PRC to the US then you’d expected there’s be oodles of spare FCL capacity. There probably is … overall. But the disruption in the supply chain means they aren’t where they need to be loaded. The indication from the shipping lines is that spot 40’ FCL rates from PRC to US West coast have recently spiked above USD7,000 which is the highest since COVID abated.
Now a doubling of sea freight costs has a much less impact on products landed costs than 145% tariffs. But there is no suggestion that the exporters or even the importers are going to eat the freight and financing cost increases.
The knock-on effects will continue to pile up.
As I mentioned up-thread, for a long time I bought the idea that Trump genuinely thought tariffs would work to the advantage of the USA. Certainly this is what’s been pushed in the mainstream media—and is still being pushed. People will say ‘his ideas about tariffs are wrong’ and even ‘his ideas about tariffs are insane.’ But they never seem to consider the possibility that he does not hold the ideas about tariffs that he says he holds.
The default assumption is always that Trump is sincere.
And that’s odd, when you think about it. He’s well known for saying things he knows to be false, when he sees some advantage to saying the false things. Why do people assume that couldn’t be true about tariffs?
The reason he says things like ‘the other countries pay the tariffs’ and ‘tariffs will bring manufacturing jobs back to us’ is that by saying them, he gets people to agree to let him impose tariffs. "He’s not doing it for selfish reasons—he really thinks they will help the USA—and who knows, we should let him do what he wants, since he’s not doing for selfish reasons. After all, he could be right!" That sort of thing.
But in fact he KNOWS that tariffs are taxes paid by Americans AND that tariffs will not bring “good jobs” to Americans (after a number of years they might bring automated factories back to the USA; but then and now, that won’t help American workers to recover even a fraction of what we are losing and will lose to the tariff-tax).
Trump knows that the Good Things he says tariffs will do are fiction.
Trump also knows that tariffs bring HIM:
- Tribute of the financial kind, and
- Tribute of the emotional kind.
Tariffs bring American business people and foreign nations to his office bearing checks and flattery. 'Please sir, won’t you grant us an exemption? Please accept this check as a sign of our admiration of you.…’
He’s never had so much fun. He’s never found anything to compare to tariffs for making him rich, and making him feel Powerful and Important.
The fact that tariffs will bring the US economy to its knees, and impoverish much of the world besides, is utterly irrelevant. Why would he care about any of that?
I am NOT in finance. I have NEVER taken a business class. I thought about this for about 15 seconds and realized that Trump was wrong, wrong, wrong. Or lying, lying, lying. Mostly I think he’s just stupid.
Of COURSE this will affect what things cost for us. Trumps just a dumbass, or, is deliberately trying to sabotage our economy which is a very real possibility.
It’s certainly difficult to think that a professional businessman could think that Walmart could “eat” the tariffs.
But, a “professional” is someone that does something well enough to get hired for doing that thing. Trump was never hired, he just inherited the name and a bunch of free stuff. And while, in theory, he was trained at Whartons, it seems likely that he has run his businesses into steady losses through being bad at budgeting (and risk analysis), thus leading to shady accounting practices to stay afloat.
It also seems plausible that Trump might use a variety of means to make his properties appear more expensive than they are (cheap materials, facades, not paying contractors, illegal labor, etc.) and playing the same game as big brands like Hermes, Cartier, etc. to inflate prices well past what you’re actually getting from your product.
In general, he thinks in the terms of the scam artist. And so when he sees China business doing well, he constructs an idea that they’re scamming customers and conspiring to inflate prices; when he sees that Walmart is doing well, he assumes that they’re scamming customers and, again, inflating their prices exhorbitantly.
After all, if he’s scamming everyone so hard and he can barely get his business to eke by without collapse, from year to year, then certainly everyone else must be scamming even harder than he is!
In that world view, tariffs on China might force the Chinese government to stop controlling the thousands of independent producers to inflate their prices. China pays the tariffs by reducing costs. Walmart eats any secondary impact that China is unable to eat.
If you simply removed all the scams from the market - the sort that Donald Trump employs - then all of the inflation will simply fail to materialize.
Trump is and always has been a liberal. Had he not inherited wealth, he’d probably be one of those guys in the SDMB pit, every other day, complaining about all the evil Capitalists and how they are taking advantage of the little guy. Instead, he felt like he had to live just that very approach out - and we see that it’s really not that successful, except for in endearing yourself to other cranks and malcontents.
He’s a carnival huckster.
Whether he believes it or not is irrelevant.
He just needs a line he can sell to the rubes, about how the tariffs will bring in money, to justify his Big Beautiful tax cut for the rich.
As more and more individuals, small, medium and large businesses get tariff bills (they are showing up in large amounts), the more folks will start to realize China isn’t paying shit. It’s us. I wish more companies would display the tariff charge, like Costco shows the alchohol tax in WA state. Give it a line item to help reinforce the customer is paying the tariff.
Not sure why I’m putting this here beyond my company got an unexpected $130,000 tariff bill on an order and we had to pay. My spouses company expects to pay nearly $50M in tariffs this year. They are employee owned so a lot of that is coming out of the employee pockets right now (customer prices will be going up as well).
I don’t think that’s true.
Trump’s strength is that more than just his cult give him credit he doesn’t deserve, for being A Good Businessman and Sincere About His Duties. These people, of course, pay virtually no attention to the news and have no idea that he must be close to being the world’s worst businessman, and sincere only about helping himself.
But IMAGE is everything in politics. So millions give Trump credit for being Smart About Business and also Genuinely Wanting To Help the USA.
This translates into votes for Congressional Republicans who will go on failing to stop Trump so long as they believe most of their voters think they should support “Trump The Smart and Sincere Businessman, Who Truly Wants To Help The US Economy.”
Most media, irresponsibly, defaults to “Trump is acting in good faith.” This, in turns, supports Congressional Republicans in failing to stop him. (Which they easily could since tariffs are their province, not a President’s.)
It matters that people start to acknowledge that he is NOT acting in good faith.
If enough people believed that he was not acting in good faith, Congressional Republicans would start to retreat from their current position (of letting him get away with anything he wants to do).
It matters.
This seems like the most relevant thread for this bit of news today that seems to have gone relatively unnoticed amidst all the other insanity: Trump will tariff Apple unless they start making iPhones in the US.
Here’s a good CBC explainer on why this is impossible:
https://www.cbc.ca/news/world/apple-iphone-us-production-1.7542362
Interesting things from the article: a worker in India who makes iPhones earns about $2400/year plus food but has to live at the factory. A worker in the US making an equivalent wage (indexed to GDP) would make $82,769 although the article doesn’t specify if this would also include food and lodging. The article also speculates (courtesy of unnamed “industry analysts”) that the iPhone’s price could jump from $799 to around $3500 or more.
Edit: almost forgot my main speculation. Since it’s basically impossible for the US to manufacture iPhones in a timeframe that is going to matter to Trump, did he announce this tariff (on a single company) to deliberately tank the stock? Was he looking to add some AAPL to his portfolio but didn’t like the price?
I think the press has been negligent by not reminding the public that we’ve had this conversation before, Foxconn was going to build a big beautiful factory in Wisconsin to make iPhones. I think Trump even lifted a ceremonial shovel, and the state and local taxpayers unceremoniously shoveled FoxConn a big pile of money to build out the site, because JOBS.
There are a few buildings on the Foxconn site, and they hire just enough people to get some minimal level of public subsidy. But no one’s building iPhones or much of anything, and I’m not sure anyone’s figured out what the employees actually do.
This is the best article I could find.
There is also an book about the fiasco, which I have read.
So, a Potemkin factory?
What an appropriate symbol of Trumpism!
But that is the whole point. Since China is the one paying for the tariff there is no reason that Walmart should have to raise prices. However aided by the fake news liberal media, they are using the tariffs as an excuse to gouge their customers, and even worse, cast aspersions on Donald Trump’s economic genius, proving that they love China and hate America. Fortunately Trump will stop them.
Ah, that venerated old Republican virtue: government control of private enterprise!!!