WASHINGTON (AP) — Treasury Secretary Scott Bessent admitted on Sunday that Walmart, the biggest U.S. retail store, might transfer part of the expenses caused by President Donald Trump’s tariffs to customers by increasing product prices.
Bessent characterized his conversation with the corporation's top executive as occurring one day following Trump's warning to Walmart against increasing prices due to the tariffs and promising strict monitoring of the company's actions.
Amid ongoing skepticism regarding Trump’s handling of the economy, Bessent countered worries about inflation, lauded the ambiguity created by Trump as a strategic move in trade negotiations, and downplayed the downgrade Friday's U.S. government debt assessment by Moody's Ratings.
However, Walmart seems unprepared to fully "absorb the tariffs" as President Trump has demanded that both the company and China should do.
People will spend more due to taxes.
Bessent mentioned that he talked to Walmart CEO Doug McMillon on Saturday. During his appearances on two news programs, Bessent emphasized that the most important factor affecting Walmart shoppers was the drop in gas prices. According to AAA, gas currently averages around $3.18 per gallon, which is lower compared to last year but has increased slightly over the previous week.
"Walmart will absorb some of the tariffs, with others potentially being passed on to shoppers," Bessent stated on CNN. "In general, I anticipate inflation to stay steady. However, I can understand why consumers might feel uneasy following the prolonged period of rising prices during Biden’s presidency," she added, referring to the record-high inflation reached in June 2022 when President Joe Biden was facing challenges such as post-pandemic economic recovery, increased government expenditures, and disruptions caused by Russia's invasion of Ukraine leading to higher expenses.
Walmart refrained from commenting on Bessent’s account of his discussion with McMillon.
On Saturday morning, Trump stated in a social media post that Walmart shouldn’t pass the additional tariff expenses onto their consumers. He added, "I'll be monitoring this closely, as well as the shoppers!!!"
Bessent mentioned during Walmart’s earnings call on Thursday that due to federal regulations, they were required "to present the most extreme situation possible to avoid litigation." In an interview with NBC, he also indicated that from his perspective, the anticipated price hikes wouldn’t be too significant.
However, Walmart officials stated earlier that high prices started showing up on their shelves around late April and have been increasing at an accelerating rate this month.
"We're designed to maintain low prices, yet there's a point beyond which we simply cannot go, just as with any other retailer," CFO John David Rainey stated to The Associated Press on Thursday.
Bessent argued that the ratings downgrade was a "lagging indicator" since the financial markets had already factored in the expenses associated with a complete federal debt totaling around $36 trillion. Nevertheless, the tax proposal was still under consideration. pushed by Trump It would add approximately an additional $3.3 trillion to deficits over the coming ten years, with a rise of about $600 billion expected solely in 2027, as stated by the Committee for a Responsible Federal Budget.
The treasury secretary asserted that deficits wouldn’t pose an issue since economic growth was expected to outpace the rate at which debts accumulated, thereby decreasing their relative impact on the total economy.
Many independent evaluations doubt the government's assertion that it can attain an average growth rate of 3%, considering that Trump's 2018 tax reductions did not accomplish this either. While those tax cuts during his first term indeed spurred economic expansion prior to the pandemic, they concurrently widened the budget shortfall compared to earlier projections made by the Congressional Budget Office.
Regarding tariffs, the Trump administration continues to work out rates with around 40 significant trade allies ahead of an upcoming July deadline. Additionally, they have just embarked on a 90-day discussion with China following their agreement last week to reduce tariffs imposed on goods from this nation, scaling them back from 145% to 30%, as part of efforts to advance negotiations.
Bessent indicated that concerns among small business proprietors regarding tariffs were probably due to the higher rates that had been applied to goods from China before. Nonetheless, this ambiguity has significantly hindered both consumers and enterprises as they attempt to devise expenditure strategies for the upcoming weeks, months, and years.
“Strategic uncertainty is a negotiating tactic,” Bessent said. “So if we were to give too much certainty to the other countries, then they would play us in the negotiations.”
Bessent was featured on NBC’s “Meet the Press” and CNN’s “State of the Union.”
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