It’s a pretty hard time to be a retailer right now.
It doesn’t matter if you’re a large, multinational company or a niche shop on Main Street.
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The world of commerce is filled with complicated problems that often lack clear-cut solutions.
That’s especially the case in retail in the U.S. since the Trump administration announced broad tariffs that affect many countries around the world.
Tariffs, or the duties companies pay to import foreign goods, are designed to help protect domestic interests and workers. They also tend to make items more expensive — either for companies or consumers.
And some of the newly instituted tariffs affect our biggest trading partners. As it stands now, current tariff rates on China are at just over 50%.
That means that a company would pay an average of a 50% tax to bring in Chinese-made goods to sell in the U.S., per the Peterson Institute for International Economics.
In reciprocation, China’s average tariff rate on U.S. goods is over 32%.
“President Trump refuses to let the United States be taken advantage of and believes that tariffs are necessary to ensure fair trade, protect American workers, and reduce the trade deficit — this is an emergency,” an official White House fact sheet argues.
Tariffs complicate business
Tariffs certainly make the business side of things more complex.
If they work with foreign suppliers, U.S. companies must now make a hard decision: either continue working with these suppliers and accept a more expensive operation, or seek domestic suppliers.
Neither of these options is particularly easy.
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If a company chooses the former option, it must incur the price associated with tariffs. This often means either absorbing heightened costs that cut into their bottom line, or passing costs off to customers. Often, many companies do a mix of both, leaving no party happy with the solution.
If a business chooses the latter option and seeks out new domestic suppliers, it must scramble to find one without disrupting supply chain and inventory too much. This can be a next-to-impossible task.
Walmart navigates tariffs
Tariffs can make shopping more complicated, too.
This is especially the case when dealing with a large-scale corporation, like Walmart (WMT) , which juggles extremely complex supply chains around the world and whose business hinges on pleasing millions of customers.
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On June 9, at the Oppenheimer Consumer Growth & E‑Commerce Conference, Walmart CFO John Rainey said his company was forced to get more nuanced when it comes to purchasing products from suppliers in the midst of the tariff uncertainty.
“Let’s use a barbecue pit as an example,” Rainey explained. “If that’s being imported and it has a certain tariff applied to that, given the elasticity expectations around that, we’re going to sell fewer of them.”
So Walmart would purchase fewer barbecue pits under the assumption that fewer customers would be making bigger purchases on more expensive items.
In some categories, Walmart might be buying “as much as 20% less of items to make sure that — or try to ensure that we don’t get into a situation where we can’t sell through the inventory that we have…that you can’t carry throughout the year,” he continued.
