The white House trying to tamp down fears of rising prices because of President Trump's tariffs. I was on the phone with Doug McMillon, the CEO of Walmart, yesterday. On Meet the Press, the Treasury secretary, detailing his talks with one of the country's largest retailers about its warning that some prices will go up. [00:00:17] And Walmart is in fact the going to the as you describe it, eat some of the tariffs. This is all from their earnings call. And on an earnings call. You have to give the worst case scenario. Well that's not really what happened Scott Bessent let's take a look [00:00:36] at what really is going on with Walmart and some of these other retailers. Trump and his officials are desperately trying now to do damage control after Walmart warned that they're planning to raise their prices because of the tariffs. Not quite eating them. But before we get to that, let's look at what's really set the president off, [00:00:54] Walmart CEO Doug McMillon said last Thursday on the earnings call that you heard Besson talking about. We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we are not able to absorb all the pressure. [00:01:11] Given the reality of narrow retail margins, the higher tariffs will result in higher prices. Then the CFO of Walmart on that same call or who was on the earnings call but said this on CNBC. This is John David. [00:01:27] We're wired to keep prices low for customers. But the level of tariffs that have been proposed is pretty challenging for all retailers, for suppliers. And and certainly our concern is that consumers are going to feel some of that. So we're going to keep prices as low as we can for as long as we can for our customers and members. [00:01:43] We've not seen a period where you've had prices go up this high this quickly. We're we're well equipped and experienced in dealing with elasticities or price increases that are going up 2 or 3%, but not 30%. I like to call him by his first and middle name, but he has a last name too. [00:02:00] That's John David Rainey and Rainey said as he. That he is pleased with the progress that's been made by the Trump administration on tariffs from the levels that were announced in early April. But they're still too high. That is despite a 90 day reprieve that lowered duties on Chinese imports to 30%. [00:02:17] Goods from dozens of other countries face a 10% duty. In response to Walmart's warnings, this is what the president wrote on Truth Social. Walmart should stop trying to blame tariffs as the reason for raising prices throughout the chain. [00:02:33] 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. Those customers also his voters. [00:02:48] But today, his spokeswoman, Carolyn Leavitt, seemed to contradict even the president. Asked about Walmart's claims, she said China would be the ones to eat the tariffs. Trump and his top economic aides have repeatedly said that Americans will not pay the cost of tariffs. [00:03:04] In fact, last week, Lutnick said people have to drop the, quote, silly arguments that consumers would pay the cost. But over the weekend, as you know, the president posted that Walmart should eat the tariffs and not charge the customer anything. [00:03:20] Does he acknowledge that if companies don't absorb the full cost, Americans will have to pay? The reality is, is the president has always maintained a Chinese producers will be absorbing the cost of these tariffs. And that is why China was so quick to hustle to the negotiating table [00:03:36] with the United States of America. They need our markets. They need our consumers. So they're turning this into some kind of leverage play by the president. It's not just Walmart saying they may raise prices. Microsoft said earlier this month that it has increased the recommended retail prices of Xbox video game consoles. [00:03:53] Barbie maker Mattel, as we know, is expecting to raise prices on its toys, and Ford warned last week it would have to raise prices on some cars and what the president and the white House to me are starting to do is say, okay, this whole error of the tariffs, we're going to have to turn it [00:04:11] into something good. And how do we turn into something good? Well, we've lowered them and we've used them for negotiation. But now we want retailers and retailers who supported us to eat that. And almost as if it's not happening, let's not talk about what's going on here. Yeah. So there's nuance in this story. [00:04:29] So first off, did some companies use the supply chain issues during Covid as an excuse to price gouge? Yes. And we showed it to you on the show where they would say, now we had to bring up the prices to this, but we would want to bring him up further, [00:04:44] because it turns out that the that the consumer could withstand it and they have enough of a monopoly or oligopoly that since they moved the prices together, you're not going to have a choice. Okay. So in this case, is that what they're doing? No. So far I have not seen evidence of that. [00:05:00] Why? What's the difference here? The extra percentage is so huge that it's they can't absorb it all even if they wanted to. Even if they got bullied into it. And by the way, here's some nuance. I don't mind Trump bullying those companies. [00:05:16] I actually think Biden should have done some of that. And so I mind the tariffs the size of the tariffs. They don't make any sense. But saying, hey, you better not pass that on to the consumers. You better eat it. It's not such a bad thing to say so that at least they don't price gouge. Okay. [00:05:31] - Now having said that. - But but I got to interrupt you there. Like, if you didn't put those tariffs in there, nobody would be having the conversation about it. - Going back to the consumers anyway. - So yeah I. Agree. Okay. All right. So no two things can. - Can you say. - That. And two things can be true at the same time. [00:05:48] You shouldn't have done the tariffs in the first place. But once you've done them. Yeah. Bullying the company so they don't raise the price as much will work a little bit, but only to a limit. Right. Why. A normal profit margin is 15%. And it depends on the industry. Some industries are way higher. Some are even lower. [00:06:04] Okay. So when you add 30% on top, well, you can't make any money and nobody's going to sell a product at a loss. It's not a thing that happens. It's not like Walmart is like, oh, you know what? Let's now start losing money instead of making money will be patriotic, [00:06:19] so we'll just eat it. No, that's not going to happen. Right. And even if they were worried about the president calling him out and using the bully pulpit, they'd only be worried for a little bit of time. And then once he stopped paying attention, they'd raise the prices right away. Right. Because they're not going to eat it. That's not what corporations do. [00:06:37] Okay. So they might eat some portion of it under dire circumstances. But at the end of the day, they're not they don't. They want to go back to their profit margin. There's they have an imperative to go back to their profit margin. So of course they're going to pass it on to you. [00:06:52] Of course, it's an economic and mathematical inevitability. So even if they don't pass the whole 30% of the extra cost of Chinese products onto you, they'll pass on 20 at a bare minimum, ten. [00:07:09] So is your prices going to go up? Yes, definitely. Is it because of the tariffs? Yes, definitely. And was it predicted by every sound economic board before the tariffs went in and as the tariffs were going in. Yes, definitely. So this was stuff that people knew beforehand. [00:07:26] And and when you heard John David Rainey talking about it, he was saying, well, you know, we're encouraged by what we've seen with the Trump tax tariffs being reduced to X percent, x percent, x percent. They didn't have to be there in the first place. And we wouldn't have had these problems if the tariffs had not been put in place. [00:07:43] And those these predicted consumer increases were were talked about for the longest time. And they came to fruition because that's what always happens with tariffs. The lessons of tariffs are that they always go back to the consumer [00:07:58] and to the retailer in many cases as well. - And that's what you're seeing here Jake. - Yes. Last thing. Could you do tariffs that are limited to an industry. As we've said many times you could, but you'd have to keep them at a number where the prices aren't going to go through the roof, but actually protects our industry. That's a tough balancing act. [00:08:14] None of that was done here. I think the markets are way off on this. The once Trump Trump did his usual trick. The tariffs are 1,000,000.5%. I mean, 145%. Doesn't matter. Those are nobody's going to buy those products. It's totally undoable. Right? [00:08:29] All right. Fine. I'm awesome. I lowered the tariffs to 30%. No you're not. 30% is already a giant number. And the markets are like yay! It's only 30%. And they skyrocketed back up. - No 30% is a massive. - Massive massive number. [00:08:45] And this is part of the Trump playbook too is to hide the problem. Right. To say all right these these companies you guys you have to eat this. You have to you have to not talk about it. You have to. It's like what he did when when there was a hard time getting the when there was a difficult time getting those Covid tests. [00:09:02] They didn't want people to get the test because they didn't want everyone to know how many cases of Covid there were around the country. It's always hiding the problem so that you can create the solution here. Well, the problem is that these tariffs went too high in the first place, and they're still super high at 30%. [00:09:19] Yeah. Super. Last thing is and let's be curious to see if I'm wrong about this. Right. Like I'm curious Because if I'm right about this, the markets are going to wake up and head back down very soon, because they're going to realize, oh, wait, if we pass on the price increases, [00:09:36] there's going to be inflation and people are going to buy less. That's going to hurt us. Yeah, but wait a minute. If we eat, the difference that's going to hurt us even more. Wait, why are we all excited that it wasn't 145% anymore? Right? And so and I think it's because the stock market is so unbelievably shortsighted. [00:09:56] They're reporting earnings from the before the tariffs. And and there I see it on CNBC every day. They're like oh earnings came in. They weren't that bad. Yeah. That's because the tariffs weren't in place right. So let's see if I'm right or wrong. And if the market stays up and everything is fine and the prices don't go up [00:10:14] and Walmart eats it all, and then you come back and make me eat my words okay. - But I'd be super surprised. - Yeah, I'd be surprised too. Every time you ring the bell below, an angel gets his wings. Totally not true. But it does keep you updated on our live shows.