U.S. President Donald Trump with his predecessor, Joe Biden.SAUL LOEB/Reuters
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Popular culture is littered with references to the gullibility of the average consumer, from the apocryphal declaration that there’s a sucker born every minute to the infamous movie line “What the American public doesn’t know is what makes them the American public.”
To be sure, U.S. companies have grown rich by finding ways to sell people things they don’t need at prices they can’t afford. And they will look for every excuse to improve profit margins by raising prices.
The latest case in point: U.S. President Donald Trump says big companies, particularly retailers such as Walmart and Amazon, but also manufacturers such as Ford and Mattel, are using tariffs as a convenient excuse to raise prices.
In a shot across the bow, he said, “I’ll be watching,” then suggested they should “eat” the tariffs rather than pass on any pain to consumers in the form of higher prices.
Mr. Trump’s detractors say he picked this fight and that any knock-on effects of his tariff policy are self-inflicted. In short, he has no one but himself to blame.
His supporters counter that any price gouging and attendant whining simply make his strategic point – that tariffs are meant to encourage more U.S. manufacturing, more sourcing of materials and products domestically and, as a result, lower prices, more job creation and broader economic prosperity.
Big retailers say that until U.S. manufacturing comes online at scale, they have no choice but to go offshore for goods to meet demand. Especially for companies such as Walmart WMT-N, price is everything; their business model is rooted in offering low-priced goods at high volumes to value-minded Americans.
More businesses weigh tariff surcharges as trade wars drag on
The gap between what Mr. Trump sees as a new era of homegrown prosperity and the current reality is a valley of death for consumers, especially those on tight budgets.
Research from the Footwear Distributors and Retailers of America circulating on Capitol Hill tries to make the point. It shows how a theoretical pair of children’s shoes made in China and sold in the U.S. for US$19 would cost US$24 post-tariff. With U.S. retailers ordering millions of pairs of shoes, that US$5 per pair adds up.
The math is simple. Importers must pay the tariff, and the most obvious way to recoup the cost is to pass it along to consumers.
Despite his widely controversial tariff policy, Mr. Trump is not the first U.S. president to wrestle with the corporate sector over consumer prices and inflation levels, which are consistently among the top issues among voters.
Joe Biden claimed – and his vice-president, Kamala Harris, echoed in her 2024 presidential campaign messaging – that big U.S. retailers were price gouging, using high inflation as cover for price hikes. During Mr. Biden’s term, inflation averaged about 5 per cent and was often much higher.
The real question is this: Are tariffs really hurting companies to the point where they need to raise prices?
Many economists suggest the impact of tariffs at the retail level won’t really be felt until the summer or later in the second half of the year because most big retailers are still selling pre-tariff inventories.
That point of view supports Mr. Trump‘s concern that companies are already looking to gouge consumers now by using tariffs as a convenient excuse to jack up prices.
Most interesting in the latest standoff on pricing is that Mr. Trump and Mr. Biden, while at opposite ends of the spectrum on most issues, and while dealing with different root causes of consumer dissatisfaction, are aligned on how to deal with companies who raise prices unfairly.
Mr. Trump is reported to be considering several tactics from Mr. Biden’s policy toolbox – from having the Federal Trade Commission launch industry-wide investigations to more targeted probes into specific products and company profits and new legislation. Even price controls imposed by executive order are an option, harking back to Mr. Nixon’s Economic Stabilization Act of 1970.
Whether government intervention can counter the effects of tariffs, real or imagined, remains to be seen. In the meantime, consumers are caught in the middle, waiting to see if Mr. Trump’s strategy of reigniting domestic manufacturing will catch fire quickly enough to offset tariff-based pricing pressures.
Until then, the biggest opportunity in this land of opportunity remains duping the consumer.