Target and Best Buy warn of price hikes from Trump’s tariffs

Shoppers won’t have to wait long to see President Donald Trump’s trade war ripple across store shelves, retail executives say.

Target’s CEO said Tuesday that the company could hike prices on fruits and vegetables in coming days in response to tariffs, and Best Buy’s chief called price increases “highly likely.” Even Walmart, which has benefited from consumers’ ongoing hunt for savings, recently warned that it’s “not going to be completely immune” from federal import taxes on America’s biggest trade partners.

The warnings pose a challenge to a president who took office pledging to reduce prices “starting on Day One” but has faced stubborn inflation and ongoing shortages of grocery staples from eggs to coffee and chocolate.

Target and Best Buy both reported earnings shortly after Trump’s latest tariffs on China, Canada and Mexico took hold, triggering immediate retaliation from those first two countries with a response expected soon from the third. Wall Street investors, retail industry leaders and economic forecasters are sounding growing alarms that the Republican administration’s trade policies could pinch households’ wallets and slow down the economy — two-thirds of which is fueled by consumer spending.

“Now that these tariffs are coming into play, the cost of many of these products are going to go up quite substantially,” said Neil Saunders, managing director at GlobalData, a retail consultancy. “There’s no way that retailers can afford to absorb all of this cost increase themselves and keep prices the same for the customer.”

Only a few major brands have vowed to hold the line on prices. “It is our intent as we sit here today to absorb those costs,” Chipotle’s CEO told NBC News when asked about tariffs this week.

Some experts expect other businesses to think twice before asking customers to pay more, wary of what shoppers will tolerate. “The retailers will have to eat a little bit, the manufacturers are going to have to eat a little bit,” JPMorgan analyst Chris Horvers recently told CNBC, adding that nonessential purchases in particular could prove more immune to hikes.

Target and Best Buy, however, are looking to manage customers’ expectations.

Both have had difficulties that predate Trump’s return to the White House. The former has been struggling to capitalize on inflation-weary shoppers’ appetite for savings, and the latter has seen customers hold off on gadget upgrades. Target said Tuesday that “ongoing consumer uncertainty” and weak sales last month will make for a bumpy road ahead, and Best Buy’s stock plunged more than 14% Tuesday despite posting a slight rise in sales and better-than-expected financial results overall.

Saunders said consumers are likely to see an immediate impact on perishable goods, much as Target has warned. Potential hikes in categories like electronics might be more delayed because some retailers have a buffer of domestic inventories that have already come through ports. But if the tariffs last, sellers of home furnishings, apparel and other items made fully or partly in the targeted countries will increasingly pass on those higher costs, he said.

“No retailer is coming out and saying, ‘Yeah, 2025 is going to be a fantastic year for us,’” he said. “There’s a lot of nervousness out there, and it does look as though this year might be a very middling year in terms of growth, and maybe a poor year in terms of profit.”

Markets tumbled on Tuesday, extending a selloff triggered Monday after Trump confirmed that his latest tariffs were coming into force as planned and hinted at further ones on agricultural exports. The S&P 500 index was trading around 1.1% lower by midday Tuesday, and the Dow Jones Industrial Average slid nearly 600 points, or about 1.4%. At least $3 trillion in value has been wiped out since Trump’s election win jolted stock markets higher, according to Bloomberg.

Barclays analysts said in a note to clients Monday that growing storm clouds were building on the economic horizon.

“We think uncertainty (on tariffs, inflation, job cuts) is already weighing on business and consumer confidence,” they wrote, citing Trump’s announcement of an additional 10% tariff on Chinese goods, on top of the 10% hike he implemented weeks ago, and his threat to slap a 25% tariff on Europe.

Gauges of consumer sentiment have taken a post-election nosedive, and retail sales fell sharply last month. Mortgage demand has tumbled despite cooling rates for home loans. Home Depot and Lowe’s each said last week that the largely still-frozen housing market has held back demand for renovations. And after a surprising recent jump in personal incomes, households reinforced their savings rather than juicing their spending, federal data showed last week.

These and other signs suggest that all but the wealthiest consumers are holding off on big purchases and looking to keep their routine spending in check.

Analysts say that a gloomier economic outlook can become a self-fulfilling prophecy, as businesses and consumers batten down the hatches in expectation of turbulence ahead.

While the overall economy has entered the year in solid shape, inflation remains sticky and the job market continues to steadily cool. The annual pace of consumer price increases has bounced between 2.4% and 3.7% since June 2023, most recently clocking in at 3% in January, a full percentage point higher than the Federal Reserve’s ideal level.

“On the plus side,” the Barclays analysts wrote, “household wealth is still enormously high, and the jobless rate is still 4%. And while excess savings have fallen sharply, we estimate that they are not fully depleted.”

The economy “is still unlikely to stumble into a recession,” they said, “but the odds have definitely risen.”