In a move that should have surprised nobody, Walmart (WMT) said on May 15 that the Trump tariffs will force it to raise prices on many items, starting at the end of the month. Virtually all retailers will follow Walmart's lead, whether they announce it or not.
The Trump tariffs are taxes on imports that directly raise the cost to US businesses and consumers. Trump falsely claims that foreign countries and businesses bear the cost of his tariffs. Americans will now see for themselves that it's not true as prices jump for thousands of everyday items.
Trump has raised the average import tax on some $3 trillion worth of products from 2.5% to around 18%. China faces the biggest jump in tariffs, with a new 30% levy on most imports. Trump put a new 25% tariff on imported steel, aluminum, and automobiles from most countries. Imports not covered by those taxes face a new 10% "baseline" tariff.
Consumers haven't noticed tariff-induced price hikes yet because most of the stuff retailers are selling now comes from inventories built up before the tariffs went into effect. The inflation rate in April was just 2.3%, which is basically back to normal after a surge of inflation that got as high as 9% in 2022. If the Trump tariffs weren't raising prices, the inflation shock would be over.
Alas, it's not.
After Trump raised the tariff on Chinese imports to 145% on April 9, shipments from China basically stopped. Almost nobody was willing to pay that tax, especially since many importers figured Trump would relent at some point.
Trump did relent, lowering the China tariff to 30% on May 12. There's a chance it could go lower if Chinese and US trade negotiators reach some kind of deal. But analysts surveyed by Bloomberg expect the tariff to remain around 30% for the rest of the year, and maybe for the duration of Trump's second term.
Business leaders now seem to be reshaping their plans around the current tariff levels. While the 145% tariff on Chinese goods was prohibitively high, importers may have no choice but to resume purchases from China at the 30% tariff rate as pre-tariff inventories start to run out. And it's normal practice for businesses to pass on as much of the higher cost of tariffs as they can to their own customers.
Trump has tried to pressure American importers into eating the cost of the tariffs and even keeping mum about their effects on business. After an April report said Amazon (AMZN) was considering a plan to show the added cost of tariffs on its website, Trump called executive chairman Jeff Bezos to complain. Amazon supposedly scrapped the idea.
But Trump can't cow all of corporate America, especially given that CEOs of public companies are legally obligated to share cost and pricing information with their shareholders and investors. Walmart CEO Doug McMillon, for instance, said Walmart would have to raise prices on the company's latest earnings call, normally a time when CEOs share information affecting profitability (and the stock price) with investors.
Other companies have announced price hikes related to tariffs, including Ford (FORD), Mattel (MAT), Birkenstock (BIRK), and Stanley Black & Decker (SWK). There will be many more such announcements. For-profit businesses will raise prices whenever they can get away with it, but they also want their customers to know when an externality, such as the Trump tariffs, is the reason for it.
It's hardly a secret that Trump's tariffs are certain to raise prices. Trump has been boasting about his tariff plans since he ran for president last year, and Americans broadly understand that tariffs mean more inflation. Consumer surveys such as the University of Michigan's show that consumers expect sharply higher inflation in the coming months, specifically because of the tariffs. In the latest survey, respondents expected inflation to average 7.3% within 12 months. That's the worst outlook for inflation since the early 1980s.
There's also no mystery about which prices will rise.
The biggest price hikes will arrive on products that largely come from China, because that's where Trump has imposed the highest tariff. Analysis by the Yale Budget Lab forecasts price hikes of 15% for leather goods such as handbags and belts, 14% for clothing and electronics, 11% for textiles, and 9% for automobiles and basic pharmaceuticals. Those are expected price hikes for all products in the US market, not just imports, because higher import prices generally allow domestic manufacturers to raise their prices too.
Voters have soured on Trump's handling of the economy, with his net approval rating on the issue flipping from positive to negative since he took office in January. But Trump inflation could be tamer than some people fear. While consumers expect inflation of more than 7%, for instance, most economists think the Trump tariffs will only push inflation to around 4%.
Gasoline prices, meanwhile, are at a manageable $3.20 per gallon or so, down about 12% from a year ago. Gas prices, advertised everywhere, have an outsized impact on the way people think about inflation. If they stay relatively low, consumers might not think it's such a big deal if they're paying more for shoes, phones, and appliances.
Trump is testing the tolerance of businesses and consumers — and the experiment will run for quite some time.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
