In the first trading session since President Trump announced his massive tariffs program, the Dow Jones Industrial Average is down 3%, with many retailers seeing double-digit percentage drops. But Walmart saw its shares dip less than 1% by early Thursday afternoon and Costco’s even rise a touch.
The reasons for that are simple: Walmart, as the world’s largest retailer, and Costco, America’s second largest, have the wherewithal to offload a big chunk of the higher costs to suppliers. And with their low prices and focus on everyday essentials, both are poised to take additional market share from rivals that depend much more on discretionary spending like Target and Macy’s.
While Walmart doesn’t disclose what percentage of what it imports come from where, China is by far its biggest supplier, with some estimates that about 60% of the goods it imports into the U.S. are from there. (On Wednesday, the Trump administration announced new tariffs of 34% on Chinese products.)
Recently, according to a Bloomberg story this week, Walmart recently got into trouble with Chinese authorities for pressuring its suppliers there to suck up the price of the tariffs. That has included asking suppliers to cut prices by as much as 10% for each round of tariffs, basically making them shoulder the Trump duties. Painful as that might be for those suppliers, having Walmart as a customer that regularly places enormous orders makes it worthwhile. What’s more, Walmart operates Sam’s Club warehouses in China, where consumers flock to what they perceive as higher quality goods and food, reducing the risk of Chinese retaliation.
That means Walmart, which took in $552 billion last year from its U.S. namesake stores and stateside Sam’s Club location, has more capacity to keep prices low than many rivals and thus keep winning market share. During the 2023-24 inflation crisis, Walmart and Costco both handily outmaneuvered rivals like Target with their focus on low prices and staples.
Costco, a bulk retailer with U.S. revenue of $184.1 billion last year, places mammoth orders with relatively few suppliers (for instance, it carries only two brands of laundry detergent) similarly give it plenty of clout to get vendors to figure out how to absorb the tariffs either mostly or entirely.
Not surprisingly, Target shares dipped far more dramatically than Walmart’s on Thursday, plunging 12%. Indeed, investment bank Oppenheimer said Walmart and Costco shares were safer bets than other retailers in the wake of the tariffs. Both companies won mounds of market share during the pandemic and during the inflation crisis, and clearly Wall Street thinks they’ll weather the tariffs storm better than others.
As for Walmart, another factor playing in its favor is the comparatively higher percentage of made-in-USA product in its assortment. As the largest U.S. grocer with half of its revenue coming from consumable items, Walmart sells a good amount of food made stateside (as well as Mexico, which was spared additional tariffs). By one estimate, American-made or grown products represent 20% of what it sells, giving it one more piece of protection against tariffs.
