The following is a lightly edited transcript of the May 20 episode of the Daily Blast podcast. Listen to it here.
Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.
President Donald Trump’s feud with Walmart is intensifying. After the retail giant warned that its prices will go up due to Trump’s tariffs, Trump erupted on Truth Social and even issued a veiled threat. Then White House press secretary Karoline Leavitt reiterated the threat at Monday’s media briefing. What’s amusing about all this is that it completely demolishes Trump’s whole scam on this issue, because it constitutes an admission that other countries don’t pay the tariffs—we do. So can Trump really use threats and bullying to conceal the truth about his policies from the American people? Today we’re talking about all of this with Lindsay Owens, an economist who’s also executive director of the Groundwork Collaborative. Thanks for coming on, Lindsay.
Lindsay Owens: Thanks for having me.
Sargent: Last week, Walmart CEO Doug McMillon said some prices are going to rise, even factoring in the temporary partial reduction on tariffs in China. Trump exploded in response to this, saying the following, “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain.... 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!!!” So Lindsay, Trump is raging that a private business has to swallow the costs of his policy. Your reaction to this?
Owens: Yeah. Look, Trump is clearly worried. This was a bombshell admission from Walmart in an earnings call that consumers were going to need to brace for impact. A large retailer known for offering low prices [and] bargains was signaling to the American people that prices were going to come up, and they were letting you know it’s not because they have shifted their position on no longer being a low-cost retailer; it’s because of Trump’s tariffs. They were quite clear on who was to blame. Not surprisingly, Trump really lashed out and basically said that he felt like Walmart was a profitable company. Yes, prices would rise because of tariffs—that was implicit in his tweet—but they shouldn’t pass them along. They should “eat” them. It was really a smoking gun that Trump is actually crystal clear on who pays the price of his tariffs.
Sargent: Exactly. Your key point there is that Trump himself is conceding that consumers are going to pay these prices.
Owens: Absolutely. And remember, this is all in the context of an economy and a political climate in which the number one issue is still high prices. This was a problem for Biden. Trump is very aware of that. He exploited it and ran on bringing prices down. And one of the first policies he implements is basically a giant price hike on the American people. And now he’s reeling from the consequences. We know the American people are crystal clear on this. Polling from Navigator shows that two-thirds of Americans expect the tariffs to increase their prices. Eighty percent of Americans are clocking the tariffs; this is not something that people aren’t aware of. He’s in real trouble here—and he’s screaming from the bully pulpit that corporations could help him alleviate the impact of his policies.
Sargent: Well, I want to get to that in a second because there’s an implicit threat in it from him. But for now, clearly all this constitutes an admission that other countries won’t be primarily paying the costs of the tariffs—since if that were the case, Walmart wouldn’t have to raise its prices and Trump wouldn’t have to threaten Walmart to prevent that. On Monday, White House Press Secretary Karoline Leavitt tried to talk her way out of this problem. Listen to this.
Karoline Leavitt (audio voiceover): The president is committed to ensuring that prices remain low for American consumers, and he maintains the position that foreign countries will absorb these tariffs.
Weijia Jiang (audio voiceover): What does he mean by “I’ll be watching” to Walmart?
Leavitt (audio voiceover): He’ll be watching, seeing what they’re doing.
Sargent: During that stretch, Leavitt also said China will be paying the costs and the evidence she cited for this is that China wants to negotiate. The whole thing is so ridiculous. If China wants to negotiate, it’s because tariffs will raise the costs of their goods, which we will pay for. And also note that she reiterates the he’ll be watching threat. Can you talk about all this?
Owens: Look, one of the main reasons that China is interested in seeing tariff rates come down is not just because they’re not going to be paying them but rather because a lot of American companies will just not buy goods at that rate. The original tariff rate that we were contemplating in the Trump administration really wasn’t a tariff rate at all. It was effectively an embargo. There are some goods at which you cannot sell at certain price points. Americans aren’t going to spend $40 on a can opener. That’s an embargo, not a price hike.
So they were very eager to see these tariffs come down, but it is definitely not the case that China was eating the cost of the tariffs. Companies who pay for the tariffed goods are the first impacted party, and then they decide how much they’re going to pass along to consumers. And by the way, they can pass along the exact amount that they pay to consumers—one for one. They can pass along a little more. We saw that during the Biden administration where companies charged a little more than the cost they bore because of inflation. Or Trump’s not wrong—they could pass along less, and they could eat a little bit of the delta. But those are the options here. And all three result in a price increase for American consumers. It’s just a matter of degree.
Sargent: Exactly. Can you talk us through the broader economics of this as well? There was some talk that Walmart might not have to raise prices due to the tariffs because they sell a lot of groceries, many of which are domestically produced. So what does it mean for the economy and the impact of Trump’s tariffs that Walmart is now saying, in spite of all that, that prices will go up? This is a bit of an indicator for the rest of the retail industry and for the economy more broadly, right?
Owens: Yeah. The reason this earnings call was such a bombshell is because if Walmart is raising prices, everybody else is too. Walmart has pole position when it comes to negotiating down costs with suppliers because they are such a large player. If they are basically conceding that they’re going to have to pass along more price to consumers, all of the little guys are going to have to pass along that amount of price and then some. So it was really a bit of a canary in the coal mine here for what we could all expect going forward.
Sargent: Can you explain that a bit more? I’m curious about this notion that Walmart has more leverage than all the little shops and littler businesses. How does that play out exactly? Why is this such a clear indicator?
Owens: Look, Walmart buys a lot of products, and the ability they have as a major stakeholder in the retail economy because of their size is considerable. Sometimes what they can do, as we saw in the pandemic, [is] the larger companies demanded that they get first cut of what was coming off the ships. So the shortages that you saw would show up in smaller grocery stores, where their shelves would be empty but some of the big boys would still have stock. Also, what they can do is twist arms a little bit to get the best pricing possible. Suppliers need to get their goods off the ship and to the retailers; Walmart knows that and they can use their size effectively in that way.
Sargent: So if I understand you correctly, what you’re saying is that because of Walmart’s clout and size and leverage, it can essentially say to suppliers—i.e., the importers who are bringing in products that are tariffed—Keep those prices down. And if they can’t do that, then nobody else can, right?
Owens: Yeah. They are the largest player at the negotiating table. So if they aren’t effectively able to negotiate away some of the price hikes, everyone else will be in an even worse position.
Sargent: And Walmart is a huge presence in red and MAGA America as well. I think we should talk about that component of it too.
Owens: Yeah. There are many communities in the United States where there are basically two places to buy your groceries: Walmart and Dollar General. So this is absolutely going to have a substantial impact, just based on the geography of the U.S., on Trump’s core supporters and Trump’s voters. And it absolutely makes perfect sense why he was reeling so quickly. He knows exactly who this hurts and who is likely to hear that news and be quite worried.
Sargent: That’s such an interesting point. The very fact that Walmart is such an omnipresence in red America and MAGA America itself shows that the tariffs are going to really start shifting opinion among his core supporters.
Owens: Absolutely. Absolutely. And look, this earnings call announcement—I don’t think it was a warning shot, right? This is interesting: You heard the press secretary say a little bit about what the obligation of a CEO is to shareholders and investors on an earnings call. She said, They have an obligation to present the most dire information.
Well, that’s not exactly right. They have an obligation to present materially significant and relevant information to their investors. So when they are letting their investors know that price hikes are coming, it’s because they do indeed plan to raise their prices. This isn’t a negotiating strategy with Trump, as it were. They’re just stating the facts to their investors, letting them know that they expect price hikes—and what they expect those price hikes to mean, which is potentially a decline in sales volume; that they are going to price out some customers from various goods and they may see a decline in their net sales in the future.
Sargent: I think that might be another reason why Trump got so furious about all this—that Walmart is saying this to its investors. A big component of what’s happening right now is investor lack of confidence. This is becoming a global phenomenon: investor lack of confidence in the United States, which is growing now. So if the prices do go up at Walmart, that spooks investors more broadly than just Walmart’s investors, right? It’s a broader phenomenon in which more and more investors will get spooked by what’s happening, yeah?
Owens: Yeah. The story of the Trump administration so far, in part, has been somewhat similar to what we saw in the Biden administration—in that we have what you might think of as a “vibecession.” So the hard data: The jobs numbers are still in a reasonably robust place thanks to the economy that Trump walked into; the inflation numbers are OK for now too; jobless claims—things like that—are relatively fine. Where you see real trouble in the waters is things like consumer confidence. We saw again last week another drop in confidence. It’s just been really stunning to see how concerned American consumers are, how pessimistic American consumers are about the current state of the economy—but also [that] their forward-looking outlook is quite negative as well.
They have high inflation expectations. They expect prices to rise. They are bullish on a recession. Somewhere north of 60 percent of Americans think we’re either in a recession or will be in one in the year to come. So yeah, the economic outlook for consumers is considerable. There’s been some softening in consumer spending numbers. We’ve seen some worrying indicators, things like credit card delinquencies, ticking up. But overall, consumers are still spending. The minute that shifts, we’re in a whole world of hurt. And that’s why folks are watching this Walmart news so closely. As Americans start to see high prices on a lot of the staples that they purchase, consumer sentiment absolutely has further to fall.
I will say it’s not just the tariffs that are potentially going to result in high prices for Americans. There are a whole host of other policies moving through Congress right now, which, if they are signed into law, will also result in high prices. We heard the press secretary talk a little bit about Trump’s strength on energy prices, but it’s actually the case that the cost of electricity and utilities is up over inflation year over year. We just heard last week that the Rhodium Group, one of the big analysts who looks at climate and energy, is predicting that utility prices could increase 7 percent for American families if some of the repeals to the Inflation Reduction Act are signed into law. You’ve got a president who knows his voters are very concerned about high prices. He’s certainly not acting like it. He’s pursuing a whole host of policies that go in the exact opposite direction. And it’s not just the tariffs; it’s really across his administration. We’re seeing the possibility of higher prices still.
Sargent: It’s amazing. I think there’s something else getting lost here as well [that] I wanted to bring up. When the president of the U.S. says about a private company, “I’ll be watching,” that’s a naked threat of retaliation. In this case, though, Trump is threatening state power against a private company in order to force it to do business in a way that pleases him—but also to force it to help him conceal the truth about his priorities from the American people, which is that these tariffs are a tax on working- and middle-class consumers to fund a massive tax cut for the rich. Trump is basically saying, Walmart, you can’t allow Americans to see what I’m actually doing here. Can you talk about that element of it?
Owens: Yeah. Look, the first thing I’ll say is I think Trump’s likelihood of success here is slim to none. Walmart is a major Fortune 500 American company, one of the largest grocers in the U.S., and one of the only retailers in a lot of quarters and pockets of the U.S. They are pretty focused on the consumer, and they’re pretty focused in these earnings calls—and when they’re making decisions—on seeing strong returns, right? That’s what their investors are interested in, that is what their shareholders are interested in, and that’s what they are interested in as well. That’s who they view as some of their key stakeholders, so I think Trump threatening Walmart is really unlikely to be successful. They are not focused on the public policy goals of their work; they’re focused on revenues. And so they are not going to be eating tariffs. They’re going to be passing them along to the extent that they can.
The other thing I’ll say here is some of what Trump was doing was trying to shift blame from his tariff policy to corporations. And we saw this happen during a period of high inflation in which people rightly noted that companies were not just passing along their rising costs—they were also going for more. The reason that companies are in a position to do that is because consumers understand inflation, they understand tariffs, and they’re expecting higher costs. Trump himself has made the likelihood that companies will exploit his tariff policy to go for bigger price increases than they otherwise would more likely. And that is because his tariff policy has been chaotic and on-again, off-again. The through line is people are expecting higher prices, but they have no idea how much higher they should be.
Companies know that and in the haze and in the mirage, they’re going to exploit it. So companies who actually now are no longer subject to considerable tariffs may very well raise their prices, too, because they know consumers are expecting it. And Trump has made the issue so salient that it is very easy to do. As you saw from the Walmart earnings call, people are going to blame the tariffs regardless of what the cause is. And so it’s really interesting that Trump himself has undermined his position here because he’s created the perfect atmospheric conditions for exploitation.
Sargent: So not only is Trump taxing working- and middle-class consumers to fund a huge tax cut for the rich and corporations, he’s also encouraging these big corporations to continue ripping off MAGA America more. Is that the size of it?
Owens: Absolutely. And we’ve heard CEOs say, People are expecting higher prices. They’re not fully tracking the shifts. We had already announced this level of pricing. We’re going to stay the course and see how we do.
Sargent: Brilliant, brilliant economic stewardship. Lindsay Owens, thank you so much for coming on to talk to us. It was a real pleasure.
Owens: Thanks for having me, Greg.
Sargent: You’ve been listening to The Daily Blast with me, your host, Greg Sargent. The Daily Blast is a New Republic podcast and is produced by Riley Fessler and the DSR Network.
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