On Sept. 17, the U.S. imposed a 10% tariff on 200 billion dollars’ worth of Chinese goods. The rate of the tariff will be raised to 25% at year-end. 5,745 Chinese goods are targeted. On Sept. 18, China responded with a 5-10% tariff on 60 billion dollars’ worth of U.S. goods. 5,207 U.S. goods are targeted.
A letter from Walmart (NYSE:WMT), as one of the more than 6,200 letters received during the comment period for the current tariffs in place, was sent to U.S. Trade Representative Robert Lighthizer. Senior Walmart Director Sarah Thorn offered a partial list of items it offers affected by tariffs, including
a range of food products (fish, vegetables, nuts, fruit, grains, flours, other products like soy sauce); beverages; personal care products (makeup to shampoos); detergents; motor vehicles, motorcycles and bicycles; travel goods, handbags and other bags; leather apparel; paper office supplies; hats; hand tools; furniture; lighting and mirrors, including Christmas lights; monitors; paper tablecloths, napkins, plates and cups, toilet and tissue paper, dog leashes, home air conditioners, refrigerators, vacuum cleaners, calculators, baby products and many others.”
Given the expansive nature of the U.S. tariffs, it would seem as if Walmart is more vulnerable to both Trump's tariffs and China's retaliation. Because of this consideration, we have estimated Walmart's exposure to both tariffs in terms of cost and revenue. The U.S. tariff exposure is measured by the company's cost distribution of its Asian suppliers, while the Chinese tariff exposure is measured by the revenue distribution of its Asian customers. Moreover, there may be an added U.S. "derived" revenue exposure due to the higher imported cost from China. In this post, I will demonstrate that the revenue impact is much more damaging to shareholders than the cost increase from tariffs.
Walmart Import Cost Exposure
There could be more
