Immediately increase prices or reduce profits?
At present, Wal-Mart is faced with a difficult choice: to reduce the high cost of tariff increase or increase the price by reducing the profit rate to pass the tariff cost to consumers. Regarding this consequence, Wal-Mart also warned in a previous letter to the US trade representative that either consumers spend more, suppliers make less, retail profits are lower, or consumers reduce purchases or completely abandon purchases.
According to estimates by The National Retail Federation, if a 25% tariff is in force, US consumers will pay an additional $4.5 billion for furniture prices and an additional $1.2 billion for travel supplies. In this regard, the washing machine is the best example. According to data from the Bureau of Labor, the market price of washing machines has soared nearly 20% in a few months after the Trump administration imposed a 20% tariff on washing machines this year.
Therefore, commodity prices have become the number one problem facing Wal-Mart.
According to Greg Melich, an analyst at research firm Moffett Nathanson, Wal-Mart’s nearly $500 billion in sales last year was about $50 billion from China’s imports or related to Chinese companies’ investments. At the same time, Wal-Mart controls 10% of the retail market in the United States, and its main group is the low-income group of the United States, and there is no doubt that the increase in the price of commodity caused by the increase of tariffs is a crit for Wal-Mart. Forcharita Kodali, a retail analyst at research firm Forrester, said that considering Wal-Mart is the preferred point of purchase for affordable products for low- and middle-income people in the United States, Trump’s tax-plus approach completely hurts those he has always claimed to help.
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