OPINION:
President Trump teed off a bit in response to Walmart’s announcement that it plans to increase prices on some of the goods it sells, partly because of the effect of tariffs on goods originating in China. As a reminder, these tariffs are still in place, albeit at a 30% rate rather than the 145% rate where we started.
“Walmart should stop trying to blame tariffs as the reason for raising prices throughout the chain. Walmart made billions of dollars last year, far more than expected. Between Walmart and China they should, as is said, ‘eat the tariffs’ and not charge valued customers anything. I’ll be watching, and so will your customers!!!,” he wrote on social media.
That’s certainly one opinion and a possible approach. Here’s another: Tariffs are specifically designed to increase prices of some goods, especially imported goods, relative to others. Their purpose and intent are to change consumer purchasing behavior, making consumers more likely to buy domestically produced goods. If the consumers see no difference in prices, then what is the point of the tariff?
Is Walmart taking advantage of the situation? Maybe. The previous CEO, Bill Simon, noted that price hikes weren’t necessary, Walmart’s profit margins had grown, and prices for imported goods affected by tariffs were falling, not rising. In his words: “They have room … to manage any tariff impact.”
Fair enough. It is easy to argue that retailers, especially the larger ones such as Walmart, should take some of the tariff hit. Walmart’s shareholders are also probably in line to bear some of the damage.
For tariffs to work as designed, however, consumer behavior must eventually change. That means sooner or later, consumers have to take some medicine in the form of higher prices or reduced purchasing power, or both. Do Americans support the idea that we should encourage more domestic manufacturing? Of course they do. Are they willing to pay a little extra for that? We don’t know the answer to that question yet.
Our reliance on goods from China is partly driven by outfits such as Walmart, which always seek the lowest-cost producer, not necessarily the most American producer. Is it that a business decision is driven at least in part by consumer preferences, especially with respect to cost? Yep. Is Walmart management to blame for not providing more American-made goods? To a certain degree. Are Walmart customers to blame for not caring much about where things are made? Yes, sir, they are.
Mr. Trump is trying to thread a very fine needle. He is trying to wean American consumers and businesses off cheap imports from China without raising prices or cratering the economy. The effort is long overdue, and we should be grateful that he has embraced this quest.
The idea that no pain will be involved in resetting American import and consumption patterns is nonsense. The undeniable truth is that it has to happen; the sooner, the better. The slaving, genocidal regime in Beijing means us no good. It intends to supplant us as the world leader and subjugate the globe as best it can.
This competition will require sacrifice from everyone. Companies such as Walmart will need to reconfigure their supply chains. At least initially, consumers may have to pay a bit more for goods. Government leaders must remind people why we are changing course and emphasize, with as little vinegar as possible, that we are all in this together.
We will also need a sustainable explanation of our strategy and a sense that our government’s strategy includes resolve. The initial effort regarding communist China was welcome. Leaving it in place a bit longer might have been wise, or perhaps not. Without a national conversation about the proposed ends and the precise means, it is difficult for companies and citizens to prepare accordingly.
• Michael McKenna is a contributing editor at The Washington Times.
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