Costco Prices: Trump’s Tariffs on China Increase Consumer Prices


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Costco is loved by shoppers for offering great value and low prices on home essentials like cheese, cooking oil, pet food, and beer and wine. Fans especially love how reluctant Costco is to raise the prices of some of its best deals, such as roast chickens ready to eat And it is hot dog and drink combo, which have been priced at $ 4.99 and $ 1.50, respectively, for decades.

But now, Costco says it is going to raise prices on many items, and the company points to US tariffs on China as the reason.

“At the end of the day, prices will go up,” said Costco’s chief financial officer. Richard Galanti said this week on a call with investors, in response to a question about the impact of the trade war with China.

The Trump administration recently tariff increase in China from 10% to 25% on imports worth $ 200 billion, and President Donald Trump has threatened to increase tariffs to 25% on imports worth 325 billion more if countries cannot reach a trade agreement. Trump says the tariffs are necessary to force China to accept more American imports, and he has argued that the Americans are not hurt by the negotiating strategy because it is China that pays the tariffs.

But ultimately, it’s importers in the U.S. who pay the tariffs on China, and economists say these cost increases are passed on to U.S. consumers through the highest prices on a wide range of merchandise, including electronics, clothing and auto parts. Buyers seem to understand that this is how rates work: in a new survey, 62% of Americans surveyed said that American consumers would bear more costs from tariffs than Chinese companies.

Big retailers like Walmart, Target and Macy’s We have been saying for months that the trade war with China would force them to raise prices. More recently, some 200 shoe companies signed a letter to President Trump asking him to lower tariffs on China, which are estimated to cost every American family an extra. $ 132 in footwear per year.

Now even Costco, the warehouse retailer known for being a fan of cost control, says price increases are inevitable because of the trade war.

“We want to be the last to raise prices”, Galanti, Chief Financial Officer, Costco he said this week, but “that doesn’t mean we’re going to wait and not do it at all.”

Galanti said Costco has been trying to avoid price increases. Among other strategies, they have sought to import certain goods from countries other than China, so that tariffs are eliminated from the equation. But China is the only viable option to import certain products and, in some cases, “prices will go up,” Galanti said.

It is unclear exactly which products would experience price increases and the degree to which Costco’s prices will increase. Analysts have said that shoppers are very likely to pay more for electronics such as smartphones and televisions, as well as furniture, bicycles, clothing and footwear due to tariffs applied to China.

One recent reportfrom UBS analysts said Trump’s trade war with China could result in “widespread store closures” in the US retail scene. That’s especially bad news for the retail segment, which in 2019 is already on its way to seeing the most store closings for any recorded year.

The impact on buyers, in the form of higher prices, will only increase as the trade war with China remains unresolved. “The real question is how long it will last,” said Costco’s Galanti. It’s “a whole new ball game,” if the new round of threatened Trump tariffs goes into effect and if the trade war persists for months to come. As the trade war drags on, costs will inevitably rise for “electronics, clothing, phones and televisions,” Galanti said.

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