US retail giants raise prices due to tariffs
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Instead, we blew up the deficit and lowered taxes (but only for the really rich).
So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.
Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.
So I lived in Canada (Ontario) for 18 years, and I've been back in the US for 4. In Canada (and here) I don't see how you "raise taxes across the board" when most tech salaries (90-180k) by the time you add in sales tax and fuel taxes you're already paying 45-50% tax rate. For example, hypothetically one year I was buying a house, so no RRSP contributions that year. On my hypothetical 160k salary I paid $58k in income tax and withholding, plus 13% HST on just about every single purchase, plus something like 24% for fuel/road taxes. That means an effective tax rate of something like 45%. But we don't get pensions or anything like that, so you also need to save. A lot. If my hypothetical example doesn't sound so bad, imagine if you were making $45k. Sure, lower tax rate, but still.
I'm sorry, as bad as it sounds to everyone, it's time for the capital class to pay up, the middle class can no longer subsidize society because it's simply too small now.
edit I want to be clear that I am not against taxes, I am for social services, I'm just tired of paying 10% of my net worth every year while folks worth tens to hundreds of millions of dollars pay very little tax because they have limited "income", but then I pay for the roads they drive on and the public services they use.
Agree w/ everything you said and have similar feelings. My SO is from Toronto and we've always considered moving but mix of job market/housing prices have continually convinced us otherwise.
You can take a loan from your RRSP for a downpayment, but only on your first home purchase.
(I was an immigrant and had owned a house in the US, and I am apparently the only person who had ever answered that question honestly, so I could not borrow from my retirement, and I had to pay provincial sales tax because of this as well).
The idea is that government-generated demand is adjusted to keep total demand for the economy to service roughly constant, while keeping everyone either employed or receiving benefits. This means when the private sector does well, the government deliberately slows down, almost hinders activity and builds up a bank (you can tell: when the government does this it drives down house prices). When the private sector does badly, the government generates economic activity with their piggy bank.
Of course, the government never lowered its expenditures. I could say "after the last crisis" but with only very few exceptions the government has never lowered expenditures. In fact all governments worldwide have lowered expenditures so few times in all of history that a lot of economists can recite the entire list of exceptions by hard.
So there will be a demand shock, which will really hurt the private sector, and this gives the government a steep drop in income while the private sector is dropping employees by the thousands and everyone is screaming for government benefits, because they're really needed. Oh and meanwhile interest rates are going up, so the government is also rapidly losing the ability to borrow, which they'll try to prevent by ... driving up house prices.
What can be said? This is exactly what Canadians (and UK, and US, and EU, and ...) citizens have voted for. Governments will be forced into drastic social services cutbacks while doing everything they can to raise house prices (in fact all prices, since that's where they loan the money, which then results in the people that manage to keep jobs/keep in business produce more goods for the government)
This sounds more disastrous than it is though. All that's really lost is the ability to buy foreign goods. So if the government is able to quickly get the private sector to build/grow the goods that are currently imported there won't be much of a crisis. However ...
All there is to say is: either move to a tax haven, or enjoy.
Everything has trade offs. Diluting the dollar increases prices for nothing in return. Pretty much all downside for everybody but the top. Tariffs increase prices to the benefit of domestic producers and benefits everybody.
What we will see is if prices are more important than building skills and wealth of our fellow citizens.
Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.
You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.
Otherwise you’re just sawing off your leg to repair a broken ankle.
This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.
It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.
Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.
I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.
> What we will see is if prices are more important than building skills and wealth of our fellow citizens.
So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?
These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.
That's the kind interpretation. The maligned one is they are brought on by those who lust for power and control and realize those come from more wealth and tariffs increase wealth disparity, increasing their percentage of the whole higher even if the pie shrinks.
If the money supply increase slower than production, you get deflation (temporary, as deflation stop investments, which slow production), so hopefully no one important use your definition of inflation.
I’m glad we’re all in such tiny, bruised, felonious hands.
In 1987 the real Trump was off in Moscow being groomed by the Russians.
Trump's is unusual in that it's widely known not just that it was ghost written, but who did it. Often the real writer's name isn't known, and we can only guess at whether it was ghost written (again, the answer is almost always "yes").
Remember future contenders... bribery is legal now.
Also, lo, PS5 https://www.reddit.com/r/PS5/comments/1my6t3o/sony_discounts...
Saying stuff like "China will pay the tariffs" was always bloviating fantasy to anyone who can stitch 2 brain cells together to make a coherent thought.
You'd think this is obvious, but you'd think people wouldn't vote for such ones either in the first place.
Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable. Blue Rose research estimates Trump tied with naturalized citizens. Little Bangladesh in Queens swung 50 points to the right from 2020. Populist rhetoric unrooted in facts is really popular among third world voters.
Blue Rose’s (the leading dem pollster) comprehensive retrospective of the 2024 election was telling: https://data.blueroseresearch.org/hubfs/2024%20Blue%20Rose%2... (“Our best estimate is that immigrant voters swung from a Biden+27 voting bloc in 2020 to a Trump+1 group in 2024.”).
As for the rest, I can’t imagine Indian Americans being happy with Trump’s treatment of India, but you probably know more about that than me.
By contrast, Trump made zero gain among non-Hispanic whites from 2020 to 2024: https://www.pewresearch.org/politics/2025/06/26/voting-patte.... His entire vote swing came from non-whites, mainly hispanics and asians, most of whom are either immigrants or children of immigrants. How do you explain a 27 point swing among naturalized citizens while non-hispanic whites didn’t move at all? That’s inconsistent with the popular theory that this election was about inflation, or group-specific issues like Gaza.
I think the explanation instead lies in the cultural differences between established Americans and immigrants and their children. If you look around at the world, small-government Anglo-American conservatism basically doesn’t exist anywhere else. It’s unusual. But conservatism exists everywhere. And if you look at conservative leaders in Asia or Africa or Latin America, they look much more like Trump than they do Mitt Romney or George H.W. Bush. Conservatives elsewhere value order, aggressiveness against the opposition, patriarchal energy, loyalty to the clan, etc. And they don’t have the taboos that prevented gentile WASPs like Bush or Romney from aggressively attacking opponents, lying to reframe policy issues, etc. As more of the American electorate is comprised of people from these foreign cultures, the more any conservative candidate will target what these cultures value in a conservative leader.
The Trump GOP this is one manifestation of America’s long shift away from being a culturally Anglo country to being a multicultural country: https://www.nytimes.com/2018/12/05/opinion/george-bush-wasps.... This is a process that started with the mass immigration of the early 20th century: the last real WASP Republican was Coolidge. Reagan talked the talk, but his substantive policies reflected shifts away from small-government conservatism necessary to get Irish and Italian Catholics to vote Republican (who had voted 80% Democrat before). And now with Trump Anglos make such a small portion of the GOP the tip of the hat to Anglo conservatism is vestigial. He’s free to be a fully third world conservative.
Harris took the same position on 'no taxes on tips'. https://www.bbc.com/news/articles/clyn511dgnjo.amp
So most people thought that "no taxes on tips" was a Trump position that differentiated him from Harris.
A tariff is a consumption tax that’s less than 100% passed onto consumers, which has the effect of discouraging imports. All good things.
Tariffs are the exact opposite of that, they're highly regressive.
Wondering why raising higher-bracket income tax is such a problem.
There are lots of ways to design a progressive consumption tax, but yes, one way is to tax luxury goods at a higher rate than essentials. This is already done in many states, for example, where groceries (or at least "basic" groceries like bread, milk and produce but not prepared foods) are exempt from sales tax.
Another way is a sales tax rebate, e.g. where everyone can file for a rebate of sales tax of, say, the first $10000 of goods in a year. So poorer people with lower expenditures end up having a much lower effective tax rate.
“Trump has floated a combination of two options: paying down the government’s multi-trillion debt and sending ‘tariff rebate checks’ to Americans.”
That seems like a pretty onerous requirement for poorer people, who are guaranteed to also be more stressed, working longer hours, etc.
Additionally there are a lot of goods that are GST exempt.
Things like basic groceries, prescription drugs, feminine hygiene products, hearing aids etc...
I mean, at the extreme, yes (some countries do have sin taxes on those sorts of things). But for a more basic example, take EU VAT. EU countries usually have three or four VAT rates; basic essential goods are often VAT-exempt.
(This occasionally leads to fun disputes; for instance see the famous Jaffa Cake court case, or the more recent determination by the Irish Supreme Court that Subway's bread was not bread.)
The FT's been having fun investigating whether Tesco's Birthday Cake or M&S's Strawberries and Cream sandwiches are subject to VAT. The answer seems to be no but maybe they should (although nobody cares, probably). Quality journalism at its best.
Thank you, this is hilarious... [0] [1] ...and not that hilarious. :-/ [2] I will never look at Subway's sandwiches the same way again.
[0] https://www.npr.org/2020/10/01/919189045/for-subway-a-ruling...
[1] https://abcnews.go.com/blogs/business/2013/01/subway-foot-lo...
[2] https://www.npr.org/sections/thesalt/2014/02/06/272455631/su...
Economists don’t love income taxes, and they really don’t love investment/capital gains taxes (see the NPR article I linked).[1]
The bigger problem is what you mean by “higher-bracket income tax.” 60% of all income is earned by the top 40% outside the top 1%: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr.... To have the kind of welfare state the U.S. has, you need to raise taxes on those people a lot. But that’s politically impossible. In 40 years, we never managed to undo the bulk of Reagan’s tax cuts.
If you’re not willing to raise the rates on more than half your potential tax base, then you’ll need to do very steep hikes on the top 1%. Or you need to explore things like wealth taxes and taxing unrealized capital gains, which economists really hate.
The European countries realized that in a globalized economy, you have to be competitive on business and investment taxes. That’s why they heavily tax the middle class, including with consumption taxes.
[1] They don’t love tariffs either. But tariffs implicate concerns about foreign relations that are basically outside the scope of economics. The economic models simply don’t factor in the political risk of outsourcing all your steel production to a potential enemy. That’s why nearly every developed country ignores the economic consensus when it comes to things like agricultural subsidies. The political risk of not being food sufficient simply outweighs the economic downside.
> Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax...
So discouraging consumption is somehow better? I mean maybe it is, but if that's the underlying argument they need to actually make it.
That’s also why the European countries like France have much higher consumption taxes than the U.S., while having similar corporate taxes. They want to discourage consumption.
Heck - do you think there is a bulk of supporters that agree with you now, when stated so bluntly and with the context that you consider yourself a democrat?
Can you at least understand that from an outsider watching this arc, it feels like Trump supporters are being led around by the nose - even if the changed policy positions are being championed by completely different individuals than the previously vocal supporters who were concerned with price inflation?
As for the specific policy argument - import taxes aren't the usual framing of consumption tax that applies to consumers, but rather they apply to industry as well. Taxing intermediate steps creates a drag on the economy, similar to if we taxed business revenue. And obviously doubling the price of equipment required to set up a new factory is completely contrary to the purported goal of bringing back domestic manufacturing.
(Never mind how several decades of following economist prescriptions about spherical cows in a vacuum has created an absolute mess)
Trump’s policy didn’t change. What changed is that people became reluctant to defend the actual reason economists oppose tariffs—because they think free trade is good. That’s one of those “spherical cow” arguments with a poor track record.
So critics of Trump shifted to attacking tariffs as a “tax.” But economists don’t oppose tariffs for that reason. Economists think consumption taxes are good! And there is no inconsistency between accepting higher prices for foreign goods to further industrial policy, and also opposing higher prices caused by money printing.
And as I also said, tariffs aren't really a "consumption tax" as economists champion, because they also tax industrial investment - exactly one of the things Trump claims his policies are meant to encourage, not discourage. But you skipped addressing that point, too.
For (a simplified) example, if there’s a 30% tariff on a $100 item, all else equal, the price is now $130, and the customer that originally would have paid $100 is now paying $130.
But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Also, the foreign supplier can do the same thing. Rather than lose the business of the US retailer, they may, in turn, eat some/all of the tariff.
I’ve seen both of these happen with products I’ve purchased over the past few months.
I’m not saying this happens a lot, but I don’t know that it doesn’t, either.
I’m just saying that it’s not as clear cut as the definition.
The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead. But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
Anyway I just think everyone in the US are very silly for allowing this to happen. Very silly indeed.
I’m not arguing that it is. But passing the price on to the customer isn’t necessarily sustainable either.
And to be clear, I’m not arguing in favor of tariffs. Just saying that, in practice, it’s not always “suppliers and retailers still get their money, and the customer pays 100% of the tariff”.
> And your $130 example still demonstrates that the consumer just ends up paying more.
That example was the case when it does follow the definition. The exceptions that followed that were when it may not.
> The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead.
Not just the customer, but the retailer or manufacturer getting goods/parts from foreign suppliers.
> But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
No argument, there. I’ve already seen some small businesses make the tough choice to close their doors because of tariffs.
It very much is in tariff loving countries. What are customers gonna do? Cry? Even if a local alternative exists, why would they not jack up prices to be just around the tariffed prices of the imports? You don't get domestic products cheaper than the imports even if they exist.
You see, tariffs are a tool. They’re protectionist. And when other countries distort markets, importers often respond this way.
Targeted tariffs have always existed, and the US and the EEC and then the EU were involved in a lot of trade skirmishes that did result in some barrier being put in place. This is not the same.
Please show me retailers that have 30%+ margins that let them happily absorb all of the tariff. Walmart's margin is 3-4%.
Even if they absorb just some of the tariff, it means the customer still ends up paying more.
https://boardgamegeek.com/thread/3462759/article/45682877#45...
> we will work with Splotter to bring these in direct and if it costs us more money than originally intended we will just eat that cost. Hopefully this leads to new relationship for us and one that can be more transparent and beneficial for both parties.
One more:
https://www.kickstarter.com/projects/18wood/18royalgorge/pos...
> We’ve said from the beginning that we wouldn’t pass any tariffs on to our backers. And unless something truly catastrophic happens in the next couple days (knock on wood), that promise still holds. You will not be paying extra tariffs on your copy of the game.
These are just two examples that I’ve encountered personally.
Again, not claiming that it’s normal, but just saying that there are definitely exceptions to “customer pays 100% of tariffs”.
Oh, it's a great example. You only have to read on a bit to see this:
https://boardgamegeek.com/thread/3462759/article/45685404#45...
--- start quote ---
The cost for sure will be greater than expected but it's not anything we would ask of our preorder customers. We did have to make a minor adjustment in price moving forward.
--- end quote ---
We don't know how much of a loss they are taking on those pre-orders.
> One more:
Another great example if you only understand what's written, emphasis mine:
--- start quote ---
We’ve said from the beginning that we wouldn’t pass any tariffs on to our backers.
But that doesn’t mean we’re not getting hit by them. We are. Hard. And the costs aren’t small.
So instead of a tip jar, we made something for you.
Introducing the Tariff Buster Promo Pack: a small thank-you gift to help us absorb the hit
While that obviously doesn’t cover the full cost of tariffs on each game, it helps us a little
--- end quote ---
Companies absorbing a hit and losing money on a one-off product is somehow "examples of retailers with 30%+ margins".
> just saying that there are definitely exceptions to “customer pays 100% of tariffs”.
These exceptions show that the only way to do that is to lose significant amounts of money to keep a promise on one-off products.
None of these exceptions show that they have 30%+ margins (quite the opposite), or that they absorb them happily (quite the opposite).
And yes, after pre-orders and backing have been fulfilled, if the companies don't fold after losing money, the product that hits the shelves will cost more.
My argument was that there are exceptions to the “customer pays 100% of tariffs” rule, as I’ve experienced firsthand (see examples in a response to a sibling reply).
There are limited cases where this might happen, but when you're talking about the likes of Walmart... Supermarket profit margins are generally below 5%. There is not much scope to absorb additional costs without passing them on.
Walmart does tend to operate more on volume than margin, but they're definitely not stuck with grocery margins on everything.
According to an LLM I just consulted Walmart's net margin for the last 5 years for which we have data never got above 3%.
To calculate net margin, we include every expense, e.g., management salaries, e.g., the cost (rent of depreciation) of the stores. To calculate gross margin, we include only the expense of obtaining (buying or making) the goods solds.
When considering whether a retailer can eat the cost of tariffs or must pass them on to the consumer, net margin is more relevant than your figure, which is gross margin.
Thus, "tariffs" can be made to mean anything.
The first order effect would be raising prices. A second order effect would be people buying different goods. A third order effect would be importers lowering prices to remain competitive (this is where we get the idea that they pay the cost of tariffs). Another third order effect would be local producers raising prices. A fourth order effect would be importers raising the prices again, because local producers raised prices also. The net effect is higher consumer prices, but potentially not by that much, while foreign producers might have to substantially lower prices. I don't know what good this would apply to, one that is neither a commodity, but it has a very competitive local market. Movies maybe? Trump also came up with the idea that local sellers wouldn't raise prices, and instead eat the price difference. This is highly questionable, but maybe for some goods it would work out...
It’s very easy to be this lazy when you’re playing Politics: Tribes. There’s all sorts of dumb-shit slogans and obviously wrong memes about making china or Mexico pay, or cat boxes. They don’t care because it isn’t what’s important, it’s just expedient to parrot some shibboleths.
The default defense comes from Trump who has - since 1980s has pushed for tariffing other countries to raise government revenue. The idea being - America drives lot of market demand. This seems to ignore basic economic facts. Importers pay tariffs and also that corporates are all about profit maximization.
Companies might eat some of the tariffs in short term but they will always reduce costs in long term. That means jacking up prices slowly, finding ways to circumvent tariffs, using low cost - maybe even harmful but unbanned substitutes in products to name a few. Even the domestic company has a reason to hike up prices just below the price of imported goods. And also, because there is less competition domestic company might even reduce R&D because they can continue to rake in profits from local markets.
The second defense is around domestic companies. I don't think anyone will disagree that each country needs to protect its most crucial domestic industries. But in those cases tariffs ae a precision tool, not a hammer. Tariffing everything doesn't make sense except it goes back to original defense - the point is to raise revenue.
Essentially even in an unrealistically optimistic position, the consumer will STILL get stuck with higher prices.
why is there ~zero prominent CEOs/managers on tv explaining how turning US trade policy in to a personalised autocracy of one senile old man is Bad, Actually?
They'd need to collectively form some kind of union to fight that power imbalance.
Which they know from being on the other side of that dynamic.
However, SCOTUS has shielded the Executive branch from any consequences. The one branch that should do the thing has abandoned doing their job / the constitution.
El País’ “ideology has been defined by a leaning towards Europeanism, progressivism, and social liberalism.
…
In the late 1970s and 1980s, El País had close connections with the Spanish Socialist Workers' Party (PSOE)” [1].
> On Thursday, Walmart CEO Doug McMillon said his company's costs keep climbing: "We've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters," he said on an earnings call.
https://www.businessinsider.com/companies-raising-prices-inc...
Perhaps this is just coming from a finance background. But I’m not a fan of folks quoting numbers from “financial reports” without saying what report they’re citing.
> having a hard time finding the ideological bias you're talking about in the El País article
To be clear, I don’t allege this article has a bias. Just that I’m going to be sceptical of a paper calling something out that aligns with their priors.
What is most surprising to me is the price increase for dairy products. I wonder how much of that increase, if any, is caused by tariffs vs other factors.
So in general they end up stuck between a rock and a hard place in a situation like this. The most logical path forward would be to work on supporting domestic supply chains, not subject to tariffs, and helping them to gradually reduce prices through increasing both volume and efficiency.
But the problem that concept runs into is that there's about a coin's flip chance that in 3 years these tariffs will simply be reversed. And any domestic suppliers that were relying on them for a competitive edge will simply be left buried. It thus discourages any sort of meaningful investment in these domestic providers.
This is true of most taxes in a competitive market. Competition was keeping margins low so the money has to come from higher prices or lower salaries, and salaries are sticky so it's usually higher prices. So if the tariffs are instead of some other taxes, it's just a revenue-neutral tax change, not inherently raising prices. But if the tariffs are on top of other taxes then it's a tax increase which gets passed on as higher prices.
The tariffs are primarily hitting the discretionary sector of products, which means people can simply stop buying them. There's also product replacement as an option. For instance the next time somebody's coffee maker breaks they end up buying a French press only to discover that not only is it way cheaper (no filters!), but it never breaks and makes way better coffee anyhow! (Pro Tip: don't use boiling water)
[1] - https://www.ers.usda.gov/data-products/charts-of-note/chart-...
There are lots of nondiscretionary products that take a while to flow through to the point you notice them. The parts to repair the machines that make things for example. Or at a low level, the inserts used in mills to make things out of metal. There are other inserts available, but they aren't as good so they need replacement more often.
The lion's share of imports are going to be alcohol and purchasing produce outside of season.
Do you mean the lion's share of food imports or imports in general? Lots of seafood is processed elsewhere and imported the US. Strangely it appears ground beef is imported to the US even though we are a net exporter of beef.
From American coffee beans? At enough quantity to cover the US market?
Prices are determined at the margin. Domestic producers suddenly have less foreign competition. That lets them raise prices. (Which is what we’re seeing, though not at an accelerated rate to what food prices were doing in ‘24 [1].)
I would add to that statement the context of the market and competitors. Even if retailers east some % of cost increase, this is still a pretty large price increase pressure.
Fair point regarding possible tariff reversal effect on industry investment!
Rock <-USA-> Hard place. At least deflation is not going to be an issue...