Ramstad: No business can ‘eat’ all the tariffs, not even Walmart

So many people think big companies have so much money. Even Donald Trump.

Over the weekend, the president sounded like a full-on anti-corporate populist leftie after executives at Walmart, the nation’s biggest company by revenue, warned they would have to raise prices because of tariffs Trump imposed on goods from other countries.

Trump said Walmart should just “eat” the higher costs resulting from his tariffs and suggested the retailer’s profits were already big enough.

Big businesses do have lots of money relative to you and me. And corporate profits were at near-record levels last year, in both absolute terms and as a share of national income.

Yet, while I risk sounding like a shill or an apologist for companies that I usually scrutinize, there are limits to the role individual businesses play in the economy. And they won’t stay in business if they lose money.

A few weeks ago, Trump defended his tariff policies — which I believe are unnecessary and terribly damaging to the economy — by saying Americans should just buy fewer dolls, and by implication, other goods. Now, he’s saying directly that businesses should lower their profits.

In a post on his own social media network Saturday night, Trump wrote, “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain.”

Then he resorted to that trick we all use when we don’t know what we’re talking about, but think someone is too greedy or too rich. We pop off with a number that’s big and unbounded, usually just by saying “millions” or “billions” or “trillions.”

He wrote, “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!!!”

While his use of capital letters and punctuation is always wild, Trump clearly doesn’t want to be blamed for reigniting inflation, which he knows damaged Joe Biden’s presidency.

Tariffs are taxes, though, and companies will pass those costs onto customers. Sure, companies may “eat” some of them in an attempt to stay out of Trump’s crosshairs. That will mean lower profits, which will upset investors, especially seniors who count on investments for their income.

Treasury Secretary Scott Bessent went on the Sunday TV news shows and said he’d been assured by Walmart’s CEO that the company will absorb some of the cost. Bessent also said Walmart executives were painting a worst-case picture because federal regulations require publicly traded corporations to disclose all the risks they face.

As he often does when he talks about Trump’s tariffs, Bessent on Sunday looked like he didn’t believe what he was saying, like a kid trying to explain the empty bag after his parents told him not to eat all the cookies.

Bessent and Trump become contradictory and incomprehensible when asked what they’re trying to accomplish with tariffs.

In one breath, they talk about building America’s manufacturing sector and employment and reshoring jobs they perceive left the country for elsewhere.

In the next breath, they talk about trying to force other countries to negotiate lower tariffs, something that would leave the global trade and manufacturing situation as it is.

Trump’s criticism of Walmart made me curious how much pain it could take from the tariffs. The company is the nation’s largest in terms of revenue. However, profits for retailers are slim.

Walmart’s profit last year was $20 billion on $675 billion in revenue. That’s a profit margin of just 3.4%, which doesn’t leave much room to absorb higher costs.

The company spent $511 billion to buy the things it sold last year. Walmart’s cost of goods only needs to rise 3.9% to match the $20 billion level of its profits. A bigger jump than that means Walmart would lose money, assuming no change in revenue.

Trump’s tariff rates on goods from other countries start at 10%. They exceed 30% on products from China, a main source of goods at Walmart and many other retailers.

Similar math applies to Target, the Minneapolis-based retailer that will report its first-quarter financial results Wednesday, and to Best Buy, the Richfield-based chain that reports next week. Indeed, it applies to all retailers.

Target made about $4 billion last year on revenue of $107 billion. That’s a profit margin of 3.7%, slightly more cushion than Walmart.

Investors for months have perceived Target would encounter more problems from tariffs than Walmart. That’s because Target gets a smaller percentage of sales than Walmart from groceries, which tend to be sourced domestically and thus not as exposed to tariffs.

Target’s executives, having tried to avoid criticism from Trump with a change in diversity actions earlier this year, are sure to be asked Wednesday for a new assessment on the effect of tariffs on its costs and prices.

Perhaps this time they’ll be more brave and honest about this president’s blundering trade policies. Then we’ll see: Is Trump so full of himself he’s going to tell every American company they make too much money?