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Walmart will hike the costs of many grocery items and general merchandise, CEO Doug McMillon said during an earnings call on Thursday, May 15. The announcement comes as Walmart's revenue rose 2.5% in the first quarter of 2025.
McMillon said the chain can't swallow the greater costs caused by Trump's tariffs.
"We're positioned to manage the cost pressure from tariffs as well or better than anyone, but even at the reduced levels, the higher tariffs will result in higher prices," he said.
The move comes amid several warning signs for the US economy.
Retail sales stayed flat in April, according to new data from the US Census Bureau. The country's gross domestic product fell by 0.3% in Q1 2025, as a surge in imports caused the GDP to decline for the first time in three years.
The US and China backed off sky-high retaliatory tariffs, but the US is still imposing a 30% combined tariff on Chinese imports, while China has put a 10% duty on American goods. Other major tariffs remain in place, including 10% baseline rates for most countries and 25% tariffs on steel, aluminum, and cars.
While Walmart leaders praised the US-China trade war truce, the tariffs are still creating pressure for the company.
"We're hopeful that it leads to a longer-term agreement between the US and China that would result in even lower tariffs," said McMillon. "We will do our best to keep our prices as low as possible, but given the magnitude of the tariffs – even at the reduced levels announced this week – we aren't able to absorb all the pressure, given the reality of narrow retail margins. In retail, managing inventory is always important."
Price hikes gradually began in April but are increasing in May, according to McMillon. The Chinese tariffs especially impact Walmart's inventory, including toys, electronics, and appliances.
Tariffs on countries like Colombia, Costa Rica, and Peru will raise prices for grocery staples such as avocados, bananas, and coffee.
"We'll do our best to control what we can control in order to keep food prices as low as possible," McMillon said. "An example would be controlling the amount of fresh food waste. In some cases, we're holding our [retail prices] where they are despite the tariff cost pressure."
That pressure comes despite inflation holding steady in April, supported by a slight decline in food prices. Restaurant and general merchandise prices remain high, causing economists to warn of potential "stagflation" over the summer, where stagnant inflation meets slowing growth and rising job losses.
McMillon said Walmart can still navigate Trump's tariff environment, since two-thirds of its products are made or grown in the US.
"We don't have to make a one-time call on a quantity," he said. "Instead, we can adjust a forecast and partner with our suppliers to adjust quantities over time as we navigate tariff impacts on costs."
Walmart is projecting second-quarter net sales to grow by up to 4.5%.
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