Walmart's Daily "Open Run" Price Hikes: Why Trump Stepped In [AK Radio]

Walmart Announces Price Hikes Amid Tariff War
Trump and Treasury Department Intervene to Prevent Consumer Burden

Walmart, the largest retailer in the United States, is currently experiencing an "open run" phenomenon. As prices continue to rise due to President Trump's tariff war, consumers are engaging in panic buying. In response to these circumstances, Walmart has announced an increase in consumer prices, stating that it can no longer withstand the pressure of rising costs.

John David Rainey, Walmart's Chief Financial Officer (CFO), said in an interview with CNBC on the 15th (local time) that "although tariffs on Chinese goods have been reduced from 145% to 30%, 30% is still a high level," and explained, "Because retail margins are insufficient, we have no choice but to raise consumer prices either at the end of this month or next month." In response, President Trump strongly criticized Walmart on his social media account on the 17th, saying, "Walmart made billions of dollars in profits last year, exceeding expectations," and urged the company not to pass on the tariff burden to consumers but to resolve the issue internally through negotiations with its Chinese partners. This was essentially pressure to retract the price increase.

Immediately after President Trump's social media post, U.S. Treasury Secretary Scott Besant called Walmart CEO Doug McMillon directly and demanded that the company not raise prices. Subsequently, the Treasury Secretary announced, "Walmart has agreed to absorb part of the tariff impact, and the price increases felt by consumers will not be significant." Such direct government intervention in corporate pricing policy is common in authoritarian countries like China or Russia, but it is extremely rare in the United States, which is seen as a symbol of the free market economy, and has become a major topic of discussion.

Panic buying is occurring across the United States, and key economic indicators are deteriorating. In major U.S. cities, large supermarkets are witnessing consumers rushing in as soon as doors open and purchasing nearly all available goods. With price tags changing almost daily, consumer anxiety over rising prices is growing, leading to widespread panic buying, which is uncommon in the United States. Even everyday items such as school supplies and accessories are out of stock.

Walmart reported U.S. store sales of $112 billion (about 156.7 trillion won) through April this year, up more than 3% compared to the previous year. However, despite this increase in sales, there are concerns that profits may actually decrease, and even losses could occur. Walmart, with over 60% of its products sourced from the United States and thus relatively less affected by tariffs compared to other retailers, has stated that it cannot avoid raising consumer prices. This suggests that the situation for other retailers could be even more severe. In particular, retailers with a higher proportion of Chinese products are expected to face even greater pressure to raise prices.

On the 30th of last month (local time), Chinese bedding products were sold out at a Walmart store in California, USA. Due to the tariff war between the United States and China, panic buying occurred. Photo by EPA Yonhap News

In response to these price hike moves by retailers, signs of weakening consumer sentiment in the United States are already emerging. In April, the U.S. retail sales index rose by only 0.1% compared to the previous month, a significant slowdown from the 1.7% increase in March. This suggests that as the effects of the tariff war intensify, consumers are beginning to cut back on spending.

Consumer spending accounts for about 68% of the U.S. GDP and was a key driver of last year's 2.8% economic growth rate. However, as consumption contracts, the U.S. economic growth rate for the first quarter fell to minus 0.3%. Experts warn that if the tariff war continues for an extended period, the United States could even record a negative annual growth rate this year.

Of particular concern is the manner in which tariffs are being adjusted. Unlike before, when tariffs were raised gradually by 10% or 15%, they have now spiked unpredictably, jumping suddenly to 145% and then dropping back to 30%. This unpredictability leaves the market with little time to adapt. If the Trump administration continues with such short-term responses, market turmoil is likely to intensify, increasing the risk of an economic downturn in the United States.

Impact on and Outlook for the Korean Economy: Sharp Decline in Exports to the U.S. The effects of the tariff war are already being felt in the Korean economy. South Korea's exports to the United States in April fell by 6.8%, with automobile exports dropping by 16.6% and semiconductor exports by 31%. Notably, semiconductor exports saw a sharp decline even though they have not yet been designated as tariff items. This indicates that anxiety over the tariff war is spreading throughout the market.

Reuters Yonhap News

If the contraction in U.S. consumption continues, investment by major U.S. technology companies is likely to decrease, which in turn could lead to further declines in exports by Korean companies. Moreover, trade negotiations with China remain unresolved; the U.S. government has only announced a 90-day suspension of strong tariff measures, but the issue has not been fully resolved. Therefore, there is a possibility that tariff issues will resurface in the second half of the year.

Due to tariff issues, the value of the dollar has recently plummeted, causing the won-dollar exchange rate to fall below 1,400 won per dollar, raising concerns that the profitability of Korean export companies could be negatively affected. Even within the Trump administration, there are now assessments that the originally planned tariff war scenario is not unfolding as expected.

As the gap between policy and the market widens, opposition to the Trump administration's tariff policy is expected to increase. Consequently, there are calls for the Korean government and businesses to respond prudently from a mid- to long-term perspective, rather than reacting only in the short term to rapidly changing conditions. Given the impact of the U.S. economic situation on the Korean economy, the economic outlook remains highly uncertain. Nevertheless, even amid such uncertainty, it is necessary to turn crisis into opportunity by developing new markets and products and strengthening the domestic market.