Walmart adjusts to Trump's tariffs through a price-changing tool

Walmart Inc. has updated the information network used daily by
its suppliers to let them submit cost increases that are directly
attributable to higher U.S. tariffs on Chinese goods.

The retailer introduced the tool, dubbed “Cost Change
Scenario,” a year ago and has been rolling it out across product
categories, according to internal memos and emails obtained by
Bloomberg. The online application, whose existence hasn’t
previously been reported, replaces Excel-based forms that vendors
had to fill out manually. The new process is quicker and lets
vendors choose a reason for the cost hike from a menu that includes
tariffs, labor, transportation and raw materials.

The move shows how the world’s largest retailer, which sells
billions of dollars of goods made in China annually, is
incorporating the reality of tariffs into its day-to-day
operations. Walmart emerged relatively unscathed from the first
rounds of tariffs on imports from America’s largest trading
partner. But that’s changed, with the U.S. bumping levies to 25
percent on $200 billion of goods including handbags and furniture,
then initiating a separate process to tax another $300 billion,
including clothing, shoes and electronics.

A Walmart spokesman declined to comment.

The tool’s name reflects the fact that while suppliers set the
cost of particular items, Walmart controls the final price on the
shelf. When suppliers raise the cost of a product, retailers have
to decide whether to absorb some or all of that increase, taking a
hit to profit, or simply pass it along to consumers, which could
hurt sales if they choose to shop elsewhere for the product.

Walmart’s previous cost-change forms varied by product
category and didn’t let suppliers choose tariffs as the impetus
for changes, according to documents obtained by Bloomberg. It’s
unclear how often suppliers are currently citing tariffs as a
reason for cost hikes, compared with other issues.

Pulling levers
Walmart said last month that it will do everything it can to
maintain the low prices it’s famous for, such as negotiating with
suppliers and finding new sources of manufacturing outside of
China. “We’re going to do the best we can to manage through
this in a way that our customers don’t feel it, pulling all the
levers that we’ve got,” Chief Executive Officer Doug McMillon
said in a presentation to analysts last week.

But Walmart has warned that higher prices on some items, such as
bicycles, are inevitable. “Increased tariffs lead to increased
prices,” Chief Financial Officer Brett Biggs said in a May 16

The updated cost-changing process is housed inside Walmart’s
Retail Link system, which it developed in the 1990s to provide
vendors with up-to-date information on sales and inventory levels
as its business rapidly expanded. The system has evolved over the
years, and today includes data-mining capabilities that let
suppliers predict what items will be in high demand. Around
Walmart’s headquarters in Bentonville, Arkansas, self-proclaimed
“Retail Link specialists” help suppliers interpret the

The uncertainty surrounding Chinese tariffs has made their job
tougher as Walmart gears up to battle rivals Inc. and
Target Corp. during the back-to-school and holiday selling seasons.
Greg Melich, an analyst at Evercore ISI, estimates that the latest
tranche of 25 percent tariffs, if instituted, would prompt
across-the-board price increases and “wipe out” profit growth
among big U.S. retailers.

“I hope that this gets sorted,” McMillon said last week,
“but we obviously don’t control that.”

—Bloomberg News

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Walmart adjusts to Trump's tariffs through a price-changing tool