BUSINESSES ARE UNNECESSARILY PASSING THE BUCK ON PRICE HIKES
Last week, President Trump made the greatest stride in recent history toward restructuring global trade to ensure fairness for the United States when trading with partner countries like China. With the new tariff rates now in effect, the President has notched a big win for his agenda and for the U.S. economy. Unsurprisingly, numbering among the chorus of critics are companies that stand to gain the most by keeping the prior status quo intact. Indeed, big businesses have been raising prices on consumers and disingenuously blaming tariffs even when there has been no evidence of cost increases.
Companies Are Blaming Tariffs for Their Own Decisions to Raise Prices
Almost from the beginning, certain businesses and retailers have been outspoken against President Trump’s trade agenda, warning that tariffs would necessarily increase prices for consumers. In May, Walmart Chief Financial Officer John David Rainey previewed “tariff-related price hikes” towards the end of May and into June, blaming cost pressures that he argued had risen “at scale and speed without ‘historical precedent.’” The mega-retailer continued to threaten price hikes even after the President slashed the tariff rate on China from 145% to 30%, leading CBS News to report that “Walmart says it plans to raise prices despite lower U.S. tariffs.” This is far from the only example of retailers using tariffs as cover to raise prices on consumers.
A May survey by the Federal Reserve Bank of New York found that “a significant share of businesses also reported raising the selling prices of their goods and services unaffected by tariffs.” Rather than raising prices because of tariffs, businesses reported they were increasing prices “to cover other rising costs such as wages and insurance.” The New York Fed also raised the possibility that “businesses were taking advantage of an escalating pricing environment to increase prices.”
The Federal Reserve Bank of San Francisco noted that “[o]ne contact observed that price increases that had been implemented in anticipation of certain tariffs were not rolled back once those tariffs were removed.”
Federal Reserve Bank of Cleveland President Beth Hammack reportedly heard from businesses not affected by tariffs raising prices anyway to keep up with the Joneses. As the Wall Street Journal reports, “she’s hearing from businesses that are raising prices even though they aren’t affected by tariffs because competitors who do face higher import taxes are raising prices.”
On a recent earnings call, Rocky Brands Chief Operating Officer and Chief Financial Officer Tom Robertson drew a line in the sand, committing to raising prices no matter what happened with tariffs on China: “So, we certainly welcome a reduction in the Chinese tariffs, but we'll be announcing a price increase here regardless of any changes of the Chinese tariffs over the next week or two to go into effect in June, as Jason touched on.” Rocky Brands is an apparel and footwear company that includes brands such as Durango, Xtratuf, and Lehigh Outfitters.
3M Chairman and Chief Executive Officer William Brown admitted on an earnings call in July to padding prices above and beyond material cost inflation to get “a little bit of an extra lift.” According to Brown, “for the year, we're getting about 70 basis points more or less of price. We typically would see about 50 basis points, which is what is required to offset 2% material cost inflation. So 2% on $6 billion of materials, $120 million, that's -- and if we pass it through in price, which we've done, that's 50 basis points. We're getting about 70 basis points. So it's a little bit of an extra lift.”
Consumers Are Wary of Retailers’ Blame Game on Price Hikes
Retailer reactions to tariffs are just the latest in a series of actions that have eroded consumer trust in businesses despite retailers professing concern for their customers. During the ramp-up in inflation in 2024, for example, grocery chain Kroger admitted to charging their customers more for staples like milk and eggs than the actual cost increase. In an internal email sent by Kroger’s senior director of pricing, Andy Groff, the executive candidly wrote that “[o]n milk and eggs, retail inflation has been significantly higher than cost inflation.” Predictably, then, with tariffs in the headlines, the majority of consumers now believe that companies are taking advantage of the climate to pad their bottom line. According to a recent Harris poll, 63% of Americans believe companies are taking advantage of the economic climate to boost profits, and 62% believe that companies are lowering product quality while simultaneously raising prices.
Large Retailers Are Already Laying the Groundwork for Stealthy Price Increases
With consumers already feeling burned by retailers who are taking advantage of tariffs to drive profits, it’s no wonder that Americans are suspicious of these same companies making it easier than ever to stealthily hike prices. Mega-retailers like Walmart, Kroger, Kohl’s, and Whole Foods are all rolling out electronic shelf labels that make it simple to instantly update product prices. Understandably, customers fear these digital labels will lead to dynamic pricing that will ultimately mean paying more out of pocket. Amazon – an early leader in dynamic pricing – has already been shown to have hiked prices on “hundreds of essentials” despite pledging in April to keep prices low. According to the Wall Street Journal, “[e]ven domestically made goods, such as the ‘Made in U.S.A’ Campbell’s soup, saw increases.”
President Trump’s Tariffs Are About Putting America First
As former acting secretary of the Department of Homeland Security, Chad Wolf explains, the President’s trade agenda is a commonsense approach to level the playing field with foreign actors like the Chinese Communist Party, who would take advantage of America, and to revitalize domestic industry. The retailers who are using the cover of tariffs to pad their bottom lines are proving that, despite what they say, their motivation is not to protect American families but to satisfy their shareholders while placing blame on President Trump.