Walmart is the biggest retailer in the world. But tariffs — especially those against Canada and Mexico — could weaken one of America's strongest brands.
The retailer's stock price dropped last week after an executive said Walmart is "not going to be completely immune" to President Donald Trump's new tariffs, said NBC News. Chief Financial Officer John David Rainey tried to reassure investors, pointing out that about two-thirds of the brands are "sourced" in the U.S., making them off-limits to trade taxes. The tariffs on America's neighbors have been delayed, leaving analysts unsure what comes next. The company would "do what we know how to do" to keep prices down, said Rainey.
Even so, "uncertainty about the state of the American consumer" means Walmart is preparing for 2025 to be a challenging year, said The Associated Press. Tariffs could "threaten the low-price model that is the core of Walmart's success." Even with Walmart's ability to "hedge" against inflation, "some goods may have price increases."
Walmart's warning could be a "bad omen for the consumer sector," said Andrea Felsted at Bloomberg. The world's biggest retailer has a "better chance than most competitors of minimizing" the impacts of tariffs on consumers because it can "get the best deals from suppliers." Given those advantages, the company probably wanted to "under-promise in the hope of overdelivering" on profits. Still, it's worth noticing the "tariff clouds on the horizon."
"Shoppers have flooded" into Walmart during the post-pandemic inflation crisis, said Nathaniel Meyersohn at CNN. But other retailers have "less leverage and may have to raise prices for consumers" as tariffs kick in. Walmart's own sales remain relatively strong for now, but its warning to investors of a "slower 2025" is a "bad sign for America's economy," Meyersohn said. And it's a "signal for the rest of the retail industry that 2025 will be a rockier year."
What next?
Walmart's guidance to investors "may have more to do with weight-loss drugs" than Trump's tariffs, said MarketWatch. The company has acknowledged that the sale of GLP-1 medications like Ozempic and Wegovy have "slightly helped sales for their pharmacy businesses," said Modern Retail. The problem is that research shows consumers "cut their grocery spending by about 6%" after they start taking the drugs. That can lead to big drops in the sales of "calorie-dense, processed items like chips."
What happens next depends on shoppers. The "consumer decides" whether tariffs matter or not, former Walmart U.S. CEO Bill Simon said to CNBC. If Trump imposes a fee on Mexican avocados, consumers will have to decide: will "you have guacamole with your chips or do you have salsa and queso where there is no tariff?" He said Walmart — and other super-sized retailers like Costco, Target and Amazon — will be OK. "Those guys will figure out tariffs."
Rich people buy more stuff. That has always been the case. But something's changing: America's wealthy are not just purchasing more than everybody else — they are increasingly propping up the entire U.S. economy with their spending.
The economy "depends more than ever on rich people," said The Wall Street Journal. Households making more than $250,000 represent just the top 10% of all earners, but a new report from Moody's Analytics reveals they now account for nearly half of all consumer spending. That's a "record in data going back to 1989," when that same cohort was responsible for a mere 36% of spending. The wealthy have increased their spending faster than the rate of inflation, said the Journal, but "everyone else hasn't." The result is that rich folks are "powering America's economy," said Quartz.
Credit card delinquencies are rising
The American economy would appear to be "humming along" with low unemployment, said NBC News. But the economic picture looks worse "under the hood" as a "stark" wealth divide grows ever wider, and the Americans who are not at the top of the food chain are "facing increasing financial difficulties." For those folks, taking on debt is one of the prime ways of keeping up: Lower- and lower-middle-income families have used credit cards to "maintain purchasing power." They can't always keep up. Missed payments on credit card debt have "grown to the point that they are now higher than pre-pandemic levels," said FICO's Can Arkali in an October blog post.
Consumer spending is the "beating heart" of the American economy, said Marketplace. People buying stuff accounts for 70% of the gross domestic product. But there is a distorting effect when that spending is weighted so heavily toward the rich. "Maybe we'd have fewer people working in really high-end hotels and resorts and a lot more people working in elder care and child care," said Josh Bivens of the Economic Policy Institute. And it's not clear that wealthy households can keep the economy going on their own. If their spending is "being driven by record stock prices, I wouldn't count on that for sustaining long-term economic growth," said Moody's Mark Zandi.
Inequality is 'unifying but divisive'
Widening income inequality could have political ramifications. The gap was a "major driver behind Americans' votes in the 2024 election for both Democrats and Republicans," said Ipsos. About a third of 2024 voters said Donald Trump was best equipped to tackle the gap, while 39% gave the nod to Kamala Harris. Voters "haven't yet unified behind a single party or candidate" to solve the issue, making the topic "unifying but divisive."
There is a link between "economic inequality and the erosion of democratic norms and institutions," researchers Eli G. Raua and Susan Stokes said in the Proceedings of the National Academy of Sciences. Even "wealthy and longstanding democracies" are vulnerable to democratic erosion as the income gap widens. The bigger the disparity in a democratic country, the "more at risk it is of electing a power-aggrandizing and norm-shredding head of government."
Starbucks is the chain that brought gourmet coffee to the masses. But it has stumbled of late. The company's new top executive has a plan to make Starbucks the place to go — again — for caffeine and companionship.
New CEO Brian Niccol plans to slash Starbucks' "notably intricate menu" by 30% to simplify ordering and reduce wait times, said Fortune. That will give "baristas the opportunity to demonstrate their craft and the time to connect with our customers," Niccol said. Other changes are designed to make Starbucks a bit more like the "third place" — where people can meet outside of home and work — it once aspired to be: A condiment bar for milk and sugar is returning to stores, as are ceramic mugs and handwritten messages on to-go cups to "revitalize the brand's community coffeehouse vibe."
Niccol "wants to make Starbucks a coffee shop again," CNN said. He is considered a "Mr. Fix-It" in the restaurant industry, having previously overseen turnarounds at Chipotle and Taco Bell. That kind of help is needed at Starbucks, where sales had fallen for two straight quarters before Niccol was hired in late 2024. In recent years the chain has shifted from a sit-down model to a place where customers order on an app and get their drinks to go. In the process, customers have registered dissatisfaction with "high prices, slow pickup orders on Starbucks' app and lackluster food options," CNN said. "There's a shared sense that we have drifted from our core," Niccol said.
Consumers are pulling back
Starbucks is not alone in facing challenges. A "long-predicted consumer pullback" is hitting the broader fast food industry too, said CNBC, with McDonald's, KFC and Pizza Hut also facing challenges. Economists had long expected that inflation — in the form of higher product prices — and high interest rates would prompt Americans to slow down their purchases of chocolate cream cold brews and Big Macs. Now that moment is here.
But Starbucks has specific problems. The company has "strong mobile order and pay sales," said QSR, an industry magazine. The data also shows that a large number of potential customers — in the "mid-teens percent" — use the Starbucks app to start an order, but bail out before completing the purchase. This suggests concerns about "long wait times" are playing a role.
For years, Starbucks was the only real premium coffee option for most consumers. But that is no longer true. "More and more coffee houses have sprouted up," said financial news service Seeking Alpha. They have Wi-Fi and good coffee drinks, too. "The bottom line is that growth will be much harder to achieve going forward," the outlet added.
Stumbles in China
Starbucks' issues go beyond American consumers. The company made a big bet on building new stores in China but now its "ambitious expansion plans are lagging," said Quartz. Starbucks announced in 2022 it would open one new store every nine hours in China — but it ran into competition from Luckin Coffee, a homegrown operation with more than 16,000 locations.
There is plenty of work to be done back home. The company announced in late February 2025 it is cutting 1,100 corporate jobs to "streamline operations," said The Washington Post. After that, Niccol believes a "smaller menu will be better for business," said The Wall Street Journal. The Starbucks donut is a "slower-selling item" that will go by the wayside, and drink options will also be considerably reduced. Workers "forget the recipes for drinks they rarely sell," resulting in a frustrating experience for customers. "I'm like, why are we doing this to ourselves?" Niccol said. Coffee drinkers will start to see changes to the Starbucks menu in March.
