Economic indicators show rising costs are hitting consumers and businesses.
More than 100 days into Donald Trump’s new term, the economic promise of lower prices is facing a stark reality: tariffs are pushing costs up — and businesses can no longer hide it. Leading the charge in confirming this trend is Walmart, which announced it will begin raising prices due to mounting pressure from import taxes.
Speaking during an earnings call on Thursday, Walmart CEO Doug McMillon made it clear: “The higher tariffs will result in higher prices.” Despite its ability to use massive scale to pressure suppliers and cushion price increases, even the world’s largest retailer admits it can no longer absorb the financial impact of US import duties.
Retail giants feel the squeeze
The company’s move is particularly significant because Walmart, more than any other retailer, represents a bellwether for consumer pricing. With narrow profit margins and high volume sales, Walmart’s admission signals that smaller retailers are likely struggling even more. As McMillon explained, “Even at the reduced levels announced this week, we aren’t able to absorb all the pressure.”
This is not just corporate rhetoric. Walmart’s public statement is a risk, considering past incidents where companies like Amazon and Mattel faced political backlash after linking price hikes to tariff policy. Still, Walmart’s decision highlights the unavoidable reality: when the government imposes tariffs — taxes on imported goods — the costs must come from somewhere. And often, that means consumers.
Although stores may appear unaffected for now, the effects are lagging. Many retailers stockpiled inventory before Trump’s sweeping 10% tariff on all imports took effect on April 2. But those supplies are dwindling. Walmart expects the more expensive, tariff-impacted goods to hit shelves starting next month.
Behind-the-scenes inflation is already happening
While consumers haven’t fully felt the impact, businesses are already adjusting. April’s Producer Price Index (PPI), which tracks wholesale inflation, showed an unexpected dip. On the surface, it seems like a positive development. But the reason behind the decline reveals a different story.
The drop in wholesale prices came from a plunge in “trade services” — a category reflecting wholesale and retail profit margins. In essence, businesses are sacrificing profits to delay raising consumer prices. This strategy, however, is unsustainable.
Consumer behavior reflects similar caution. Americans rushed to make purchases in March — particularly on high-cost items like electronics and vehicles — in anticipation of the tariff shock. But by April, spending slowed dramatically. According to the latest data, consumer spending rose just 0.1% year-over-year.
The convergence of these data points — Walmart’s announcement, wholesale pricing shifts, and declining consumer activity — underscores a hard truth: Trump’s tariffs are reshaping the economy, and not in the way originally promised.
Hard numbers, harder consequences
Joe Brusuelas, chief economist at RSM US, told CNN, “We are beginning to see the impact of trade policy filtering into the hard data… it’s impossible to deny that it is now affecting revenues and profit margins for firms.”
And that’s not the only warning sign.
JPMorgan Chase CEO Jamie Dimon said Thursday he’s not optimistic that the US will avoid a recession in 2025. He even questioned the nation’s long-held position as the global financial safe haven. “You do not have a divine right to success,” Dimon stated in a Bloomberg interview.
Federal Reserve Chair Jerome Powell echoed concerns, warning that supply chain disruptions could become more frequent and persistent, making price stability harder to maintain. “We may be entering a period of more volatile shocks,” he said.
Although certain categories — like airfare, gasoline, hotel stays, and sporting events — are seeing price declines, analysts say this is due to weakening demand rather than economic strength. When consumers cut back on vacations, it’s not good news — it’s a sign of shrinking confidence.
Looking ahead
Friday is expected to deliver new “soft data” in the form of consumer sentiment from the University of Michigan. Confidence levels have steadily declined since January, but analysts are watching closely to see if the recent détente between the US and China inspires a modest rebound in optimism.
Meanwhile, major retailers like Target, Home Depot, and Lowe’s are set to release earnings next week. Their financial results and forecasts will offer more clarity on how deeply tariffs are cutting into retail performance.