Friday, May 17, 2019

Trade War Gets Real As Walmart Increases Prices

In the latest sign that the trade is starting to affect the greater economy, Walmart has announced that President Trump’s tariffs on Chinese goods will lead to increased prices at the giant retail chain.

“We're going to continue to do everything we can to keep prices low. That's who we are. However, increased tariffs will lead to increased prices, we believe, for our customers,” CNN reported that Walmart Chief Financial Officer Brett Biggs told reporters on a conference call discussing earnings for the first quarter of 2019.

Biggs did not say which products would be subject to the price increases, but President Trump’s most recent round of tariffs, which applied a 25 percent import tax to $200 billion of Chinese goods, affects a wide range of products that are purchased by a large number of Americans. Per CNN, Walmart imports about 26 percent of its merchandise from China and with a Walmart store within 10 miles of 90 percent of Americans, the vast majority of the country will be paying more for consumer goods.

Walmart’s announcement undercuts the president’s claim that China is paying the tariff taxes. Instead, Chinese manufacturers have largely kept their old pricing structure and American importers have paid the tax. Importers pass the tax along to retailers like Walmart, who are now passing it along to their customers.

The Walmart price increases will hit a core segment of the Trump coalition. Walmart is known for its blue-collar clientele and the fact that its stores are often the only option for many items in rural areas. It is these blue-collar, rural voters who have formed the most stable part of Trump’s base as support for Republicans among most other demographics has declined since 2014.

Depending on the length of the trade war and whether more tariffs are applied in coming months, Trump may find that his rural base fracturing. Already farmers, who are among the hardest hit from the trade war, are showing their discontent with the policies that have closed off Chinese markets for American agricultural products.

“We’re in a free fall out here in agriculture. We've seen a 30 percent decrease in prices of soybeans, and this isn't all about soybeans,” Christopher Gibbs, an Ohio farmer said on CNN. “With the geopolitical turmoil that the president has thrown into the mix over the last year, the markets just don't have anywhere to go.”

Now, with Walmart and other retailers raising prices to pass along Trump’s tariff tax to their customers, farmers and other exporters are being squeezed from both sides. They are earning less as foreign markets find cheaper, untaxed alternatives to American goods and they are paying more due to price increases.

As we’ve reported previously, Morning Consult tracks presidential approval across the 50 states. Polling this year shows Trump underwater across the Rust Belt and with a net approval of fewer than five points in many typically Republican farm states such as Georgia, Indiana, Nebraska, and Texas. Unless the president gets a deal to resolve the trade war with China soon, we may find out how low he can go.

Originally published on The Resurgent

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