Walmart Sounds the Alarm: Tariffs Will Hit American Consumers Hard

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Transcript:

[00:00:04] Doug McIntyre: So, you had a funny rumor last week. And maybe it was true. It

[00:00:08] Lee Jackson: doesn’t have anything to do with you or me, does it?

[00:00:10] Doug McIntyre: and this is the rumor, Amazon was going to put the cost of tariffs on everything that was sold@amazon.com, so they wouldn’t be blamed for the price increase. It’s like, right, it should be a dollar.

[00:00:25] Doug McIntyre: It’s a dollar 20. Now blame the Chinese. Right? Okay. Don’t blame us because there’s a 20% tariff. Apparently, according to the rumor, president Trump, find out about this, calls Jeff Bezos, goes crazy with him. Bezos calls the people at Amazon and said, don’t do it. Okay, so that’s a rumor. Let’s set that off to the side.

[00:00:48] Doug McIntyre: Well, Walmart people didn’t care. They just said on the earnings call, no, we’re gonna cost more money because of China. Yep. Just so everybody knows, we ain’t eaten it. We’ve got 4% margins here at Walmart. This is not a mega. Yeah, we can’t eat this. No. And we’re gonna pass it on to the consumer. Now, the White House didn’t like that, and I understand why.

[00:01:11] Doug McIntyre: It’s basically pointing out that the consumer’s getting hit. What I think this does though is I think it opens the door for Microsoft (NASDAQ: MSFT), for Amazon to raise prices. Maybe not put down what the German premium was or the Chinese premium was for it. But to, to actually say we are raising prices because of the Chinese.

[00:01:33] Doug McIntyre: Walmart has, in essence, opened the door for that.

[00:01:36] Lee Jackson: Yeah. And you know, what else it’ll do for both of these guys, Walmart and Amazon is, and you can guarantee that their boards will be talking to them about this. This will get them to source more product from the United States of America.

[00:01:50] Lee Jackson: And it will also get more people here on board to build that pride. And, while that won’t happen overnight, it certainly, that’s the whole, backline for the president anyway. He wants to onshore everything, which is good. It’ll create jobs, but it won’t be overnight.

[00:02:10] Doug McIntyre: It won’t be overnight.

[00:02:12] Doug McIntyre: I think it’s unrealistic that they think that President Trump is gonna bully them into, eating all the Chinese tariff prices. So look, here’s the bottom line. The reason I think inflation is coming back is because Walmart. If Walmart’s raising prices, if you look Walmart, there’s a Walmart within 10 miles of every 90% of the people in the United States have a Walmart within 10 miles of it.

[00:02:40] Doug McIntyre: Crazy statistic, but it’s true. Yeah, but it’s a true statistic. There are 4,600 Walmarts in the United States. If Walmart’s raising prices, it is inflationary. They’re a big enough part of the retail universe. But if they’re raising them, you know the target’s raising them. This is now given permission to Amazon to absolutely color for them to raise it.

[00:03:02] Doug McIntyre: So you, I don’t have a number, but someplace between five and 12% of the cost that you’re gonna buy that are sourced in China, the consumer, the American consumer, is gonna get hit with that. Yeah. And it is by its nature inflationary. It was gonna be 145% tariff. No, of course it wasn’t.

[00:03:26] Doug McIntyre: Mr. Trump’s interesting. He likes to negotiate with himself. He didn’t hear from the Chinese. That’s very true. He does. No, no, no. Just a hundred. He, he just said, the Chinese are nice people. We’re gonna take it down to 30. The fact is, is that look, 30 is better than 1 45, but 30 is still toxic.

[00:03:46] Doug McIntyre: Yeah. It’s to inflation. At Walmart where they source 75% of their goods from China, you are gonna see tens of millions of Americans spending more money on things because Walmart has raised its prices.

[00:04:02] Lee Jackson: Yeah, yeah. And it, it is interesting because we’ve almost come full circle now where, 20, 30, 40 years ago, Ross Perot talked about this moving all the production and everything out of the country was gonna be inflationary. And it, it, while it took 30 years for Ross Perot to be right, he’s right. And now we have to pay that price and nothing’s gonna happen quick. But ultimately, and I know, and I think everybody knows China’s the one that’s gonna lose here.

[00:04:36] Lee Jackson: They just because they are the biggest importer in the world and they just can’t have this happen. Their plants have been shut down. There’s been all sorts of rumblings of protests and, and things that generally don’t happen in China. So something will, something will give, but boy, it’ll be interesting to see what the end game is.

[00:04:57] Doug McIntyre: Well, if I were investors right now, I would start to look for what I would describe as companies that do not have to raise their prices, right? If you said to me, what company do I want to buy shares in, it’s that company that doesn’t have to raise prices, right? The minute you start to raise prices, you are gonna lose some of your customers.

[00:05:19] Doug McIntyre: I don’t care if it’s half percent, 5%, 10%. McDonald’s found this out recently. Yeah, it wasn’t tariff base. Forget tariffs. They just found out that if you raise prices, people aren’t gonna buy as many hamburgers. Walmart is going to find out that is it passed the loan. Since people are gonna get, they only have so much money.

[00:05:38] Doug McIntyre: I mean, yep. Most of the people will shop at Walmart or E from an income standpoint, either at the bottom or middle. Now you see a few Mercedes there, but not many. Once you start to squeeze that more, you’re starting to squeeze that consumer sales go down. I’m not optimistic about Walmart’s earnings in the second half of the year.

[00:05:59] Lee Jackson: No, they could. Well, and again, everybody said, well, we’re not giving guidance and we’re not doing this, and we’re not doing that. That’s the CEO backdoor for all these guys. But yeah, they’re gonna have a tough time hitting these. And they’ve had good numbers over the last year or so.

[00:06:14] Doug McIntyre: Oh no. Listen, listen, I’m, it’s a very well run company. It’s had great earnings. They are in a bear trap.

[00:06:20] Lee Jackson: Yeah, they are.

[00:06:21] Doug McIntyre: They’re getting prices passed on to them. They’re gonna pass them on to the consumer. The consumer is scared, as you saw from today’s consumer confidence number. Yep. Consumer is going to start to feel tight as prices going to go start to go up.

[00:06:36] Doug McIntyre: Discretionary income is gonna start to inch down. consumer spending is two thirds to three quarters of GDP in the United States, so now you’re facing a recession that’s inflation based. Yeah. If you go back a year. Or even a few months ago when you started to see the CPI go down, people said, oh, discretionary income’s gonna go up. The economy’s gonna do better.

[00:07:01] Doug McIntyre: Tariffs are now taking that and they’ve thrown the big, they’ve thrown the big car into reverse.

[00:07:06] Lee Jackson: Yeah, and we’ve been talking about it and I don’t know if you remember this, but 30 years ago, 40 years ago, so ago, I think it was Banana Ram, which was an all girl singing group, and I, I think it was then that did the song was called Cruel Summer.

[00:07:22] Lee Jackson: And anybody that’s old enough probably knows this song, but that’s what we could experience this year. Is that we could have a cruel summer where all of this starts to come to fruition. Not bad now, but these tariffs haven’t hit in. And so unless there’s, and they, they’re actually not supposed to go in, it was 90 days.

[00:07:42] Lee Jackson: So is it gonna be by August? Will it be by late July, but. It could be difficult this summer. And you’re right, it’s kind of an inflation from, from outside influences, not your typical inflation. and there’s not, and there’s nothing the fed could do about it. They’re not gonna cut rates while the European banks are cutting rates.

[00:08:04] Lee Jackson: They’re not gonna cut rates. They can’t.

[00:08:07] Doug McIntyre: I it for me. Walmart’s gone from a strong buy for the last two or three years. Yep. A buy or maybe a hold?

[00:08:16] Lee Jackson: Yeah, it’s probably still a buy on any weakness, but yeah, it’s certainly a hold for the long term, but I’d be real careful about putting on new positions right now, especially after a huge snapback rally that saw.

[00:08:31] Lee Jackson: one indices go into bear market territory and one, right close to it. I mean, all those losses have been, removed on a, ’cause we had such a snapback rally, so I’d be careful trying to dig, get into stuff right now.

[00:08:47] Doug McIntyre: Yeah. I do not like Walmart at this price.

[00:08:50] Lee Jackson: No, I think, it’s a wait and see stock and it could be wait and see till 2026

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