by Dr. Roy Cordato
Senior Economist, Emeritas
Walmart has low prices for all kinds of products, from clothing to shoes to groceries and almost everything in between. And the fact is that those who benefit the most from those low prices are lower income families whose dollars go a whole lot further at Walmart than most other retailers. Walmart brings its products to where its customers are, particularly to rural areas where job opportunities are scarce, and incomes are low. The retailer has 217 stores in every corner of North Carolina, and it is by far the largest employer in the state with over 58,000 employees. And this doesn’t include the well over 87,000 jobs associated with North Carolina businesses that supply goods and services to Walmart.
But the point of this is not to sing the praises of Walmart but to point out that all this economic activity is not ultimately generated by Walmart. In reality, it is generated by Walmart shoppers. It is all of those millions of paying customers every day that actually create these jobs and generate the incomes associated with them.
It starts at the cash register and works its way back through all employees in the store – from the greeters to the cashiers, those who stock the shelves, and the managers. From there it works its way further back to all those who work for businesses throughout Walmart’s supply chain. And what drives these customers in the first place are low prices. Anything that threatens these low prices threatens Walmart sales and therefore threatens all that was just described.
This brings us to trade policy and President Trump’s tariffs on China. Walmart keeps customers coming through the door with low prices and the way it does that is by purchasing from suppliers of the products who will give it, in turn, the best prices. Since the days of Sam Walton, Walmart has not let the location of those suppliers stand in the way of its ultimate agenda, serving their customers. Walmart will buy from whoever will sell them what it chooses to sell in its stores at the lowest prices so it, in turn, can pass the savings on the customer. It has always known who the company’s real engine of prosperity is: the customer. Walmart competes in retail markets on several margins—convenience, location, variety, selection—but most importantly, price. As it has turned out, over the years, it has come to be able to do this by importing a great many of the products it offers for sale from China. According to the Alliance for American Manufacturing, a Walmart critic, the company imports 80 percent of what it sells from China.
What all this means is that Donald Trump’s tariffs on imported goods from China, which may end up being as high as 25 percent, takes aim directly at Walmart and its customers and consequently North Carolina’s No. 1 employer and No. 1 provider of products, including most of life’s necessities, to North Carolina’s lower-income consumers.
The fact is that tariffs are not a tax on particular goods, they are not a tax on corporations, and they are not a tax on foreigners. Neither goods nor corporations can pay taxes. And while Chinese exporters of goods to the U.S may be the ones writing the check to the federal government, ultimately the customers for those products foot the bill. The tariffs will raise Walmart’s costs, which will be passed on to its customers in the form of higher prices. This is true even if it switches from Chinese made goods to products made in other countries or even products produced in the U.S. These will be more costly. The reason is that if it wasn’t, Walmart, in their aggressive pursuit of low-cost products, would already be using these suppliers.
Higher prices, of course, mean fewer products sold. Lower sales mean fewer stores opened, fewer expansions, and fewer employees than there otherwise would be all along the supply chain. Ultimately, it means lower income North Carolinians whose hard-earned dollars are stretched more thinly, will find life a little tougher.