Costco CEO has dire message for tariff-weary consumers

The warehouse club's members should get ready to pay up.

Apr 21, 2025 - 13:50

Costco CEO has dire message for tariff-weary consumers

It's pretty much impossible to turn on the news these days without hearing the word "tariff" in some context or other.

Americans are growing weary of tariffs even before their full impact has been realized.

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So far, tariffs have caused the stock market to plummet and have led many financial experts to change their recession forecasts for the worse. The fear, of course, is that tariffs will drive up everyday prices for consumers at a time when they're already hurting due to stubborn inflation.

Inflation started ticking upward in 2021 and reached its peak in mid-2022. Costs aren't rising as rapidly now, but they're still elevated. And many consumers are feeling the strain.

A number of retailers have noticed a change in consumer spending as a result of lingering inflation. Tariff-related increases could easily make things worse for retailers and customers alike.

Many Costco products could see a price increase.
Image source: Brooks Kraft LLC/Corbis via Getty Images

Consumers can beat inflation at Costco

There's a reason Costco members have remained loyal at a time when living costs are up.

Despite the fact that Costco charges shoppers a membership fee just to get in the door, the warehouse club giant has a reputation for offering incredibly competitive prices. And taking advantage of those bulk prices has helped many consumers weather recent economic times.

Not only have Costco's prices held up well in the wake of inflation, but many experts believe the company is poised to handle tariffs fairly well. Because Costco limits its inventory to about 4,000 SKUs (stock keeping units), it has more flexibility than some of its competitors to negotiate prices with suppliers.

Costco can also seek out alternative sources for products if tariffs start to drive up their price. And if that fails, Costco can always opt to make its version and slap the signature Kirkland label on the box.

Costco prices could rise once tariffs take hold

Although Costco has done its best to position itself as a retailer that can work around tariffs, it's not immune to them.

During the company's last earnings call, CEO Ron Vachris was quick to point out that tariffs have the potential to impact Costco just as they might batter other retailers.

In fact, Vachris warned, "About a third of our sales in the U.S. are imported from other countries."

Still, Vachris added, "It is difficult to predict the impact of tariffs." And he reassured investors that Costco is prepared to pivot as necessary should they become a huge problem.

"Our team remains agile and our goal will be to minimize the impact of related cost increases to our members," he said.

Not only is Costco in a strong position to negotiate with suppliers, but it also has the flexibility to pull products from its shelves when the numbers don't work out.

This isn't to say that shrinking its inventory will be Costco's only recourse. But another thing Costco has going for it is its famous treasure hunt.

Costco makes a point to rotate inventory to keep it interesting, and to make the shopping experience exciting for members. If it's forced to pull products from shelves due to tariff-related impacts, it will no doubt seek to replace them with enticing new offerings for consumers.

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Costco fans, however, may need to brace for not just higher prices, but the disappearance of some of their regularly purchased items.

Recently, Costco made the decision to stop carrying its Kirkland Signature soy milk because the product wasn't valuing out. That caused a lot of members a world of distress.

If Costco can't offer prices it's happy with, it typically won't hesitate to remove items from its lineup. But that could deal members just as much of a blow as price increases.

Maurie Backman owns shares of Costco.