From Tariffs to Tags: The Price Hike Reality for US Shoppers (Part 1)

President Donald Trump’s recent moves on trade — including sweeping tariff hikes followed by abrupt reductions — have rattled U.S. corporations, particularly in the retail sector. With import duties reaching as high as 30% for Chinese goods and 10% for imports from many other countries, retailers are under intense pressure to decide who will absorb the cost: them or their customers.

During the first-quarter earnings season, a staggering 91% of S&P 500 companies mentioned “tariffs” in their earnings calls — a record high, according to FactSet. Even more telling, 84% of companies cited “uncertainty” as a key concern, second only to the early pandemic months of Q1 2020. This uncertainty is now playing out in store aisles and corporate strategy rooms across the country.

Tariffs Weigh Heavily on Retailers: Higher Costs, Lower Visibility

For retailers, the first half of 2025 has already been tough — but the second half could be worse. The latest wave of tariffs is starting to show up in earnings reports and pricing strategies. Big-name brands like Costco, Best Buy, Walmart, and Target have either already increased prices or announced they will soon. Many others, like Macy’s, are likely to follow.

Behind the scenes, executives are scrambling. The Trump administration’s abrupt shifts — including temporary tariff rollbacks after initial steep hikes — have made long-term supply planning nearly impossible. As retailers aim to reassure investors while avoiding consumer backlash, they’re reducing full-year guidance, trimming profit forecasts, and in some cases, delaying investment or hiring plans.

According to a survey by Chief Executive Group and AlixPartners, 68% of U.S. CEOs say they have already raised prices or plan to do so in response to tariffs. UBS Wealth Management economists estimate that a 10% tariff can translate into a 4% jump in retail prices — a hit that consumers are starting to feel at the checkout.

Even the biggest players aren’t immune. President Trump has publicly urged Walmart to “eat” the cost of tariffs rather than pass them on to customers, but with razor-thin margins, experts say that’s unsustainable. Absorbing those costs could mean cuts to expansion, hiring, and capital investment — further straining an industry already fighting to stay lean in a high-interest-rate environment.

How Big Retailers Are Responding: Caution, Price Hikes, and Uncertainty

Major U.S. retailers are reacting differently to the tariff turbulence, but a few common themes stand out: price increases, margin pressure, and growing uncertainty around future earnings.

Walmart (WMT): Price Hikes Coming, but Selectively

As the largest retailer in the U.S., Walmart is feeling the heat from tariffs across a broad range of imported goods, including everyday items like bananas, toys, and avocados. While about one-third of its merchandise is sourced domestically, Walmart still relies heavily on global supply chains from countries such as China, Mexico, and Vietnam.

CEO Doug McMillon and CFO John David Rainey emphasized that although Walmart aims to keep prices low relative to competitors, the company will have to pass on some costs — especially in Q2. Consumers should expect more noticeable markups starting late May and increasing into June. Walmart has responded by diversifying supply chains, shifting materials (e.g., aluminum to fiberglass), and exploring alternative sourcing options to minimize exposure.

Despite beating Q1 earnings expectations, Walmart narrowly missed revenue forecasts. The company also announced around 1,500 job cuts in a restructuring effort, officially unrelated to tariffs — though the timing raises investor questions about underlying cost pressures. For now, the message from Bentonville is one of strategic caution and selective price increases.

Costco (COST): Absorbing Costs — But Not Indefinitely

Costco has taken a proactive approach to tariffs by front-loading imports and adjusting sourcing strategies — especially for seasonal goods and private-label products. CEO Ron Vachris noted the company has shifted supply chains away from China where possible and is actively working with vendors to reduce the cost impact.

So far, Costco has managed to avoid sharp price hikes on most items, though executives acknowledged that increases will start to appear later in the year as new inventory cycles in. The company’s bulk-buying model and affluent member base provide some cushion, but it’s clear even Costco’s resilience has limits. About a third of its U.S. sales depend on imported goods, and tariff pressure is expected to mount in non-food categories.

Costco’s long-term strategy remains unchanged: prioritizing membership growth and customer loyalty over short-term margins. However, as tariff impacts accumulate, that trade-off may become more costly.

Target (TGT): Delaying Hikes, Adjusting Supply Chains

Target has adopted a cautious stance, declaring that price hikes will be a “last resort.” But in practice, management confirmed that some prices have already increased — particularly in home goods and apparel. CEO Brian Cornell emphasized broader macro uncertainty, including consumer sentiment and social backlash, as weighing on guidance alongside tariffs.

Target downgraded its full-year forecast after weaker-than-expected Q1 sales. The company is actively renegotiating contracts, reassessing product lines, and diversifying sourcing beyond China to limit future exposure. According to Chief Commercial Officer Rick Gomez, about half of Target’s inventory is sourced domestically, and the company is working to increase that share.

Discounting has been one lever Target used to maintain competitiveness, but that strategy may face limits as input costs rise. Investors should watch how effectively Target balances price competitiveness with margin protection in the coming quarters.

In the upcoming second part of our series, we’ll dive into how other retailers are responding to the ongoing tariff challenges and what it means for investors.