(David Paul Morris/Bloomberg via Getty Images)
Best Buy is warning that Trump’s 25% tariffs on Mexico and China will drive up prices for consumer electronics in the US.
“We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” Best Buy CEO Corie Barry said on Tuesday.
In an earnings call, Barry noted that “China and Mexico remain the number one and number two sources for products” at the retailer. Both countries are home to many electronics factories.
On the same day, the White House placed another 10% tariff on Chinese imports after rolling out an initial 10% on Feb. 4. That first round of tariffs on China were already expected to reduce Best Buy’s sales by 1 percentage point due to the price increases driving down some demand, the company’s CFO Matt Bilunas said in the call.
Best Buy refrained from predicting the full impact since it remains unclear how long Trump’s trade war will last and if it'll escalate. “The giant wild card here obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year and a general consumer confidence that is showing a little sign of weakness at the moment,” Bilunas said.
“We’ve never seen this kind of breadth of tariffs, and this, of course, impacts the whole industry,” added Barry.
In response, the retailer is trying to source more goods outside of China and Mexico as many vendors, including HP and Acer, migrate their manufacturing elsewhere. “But again, it’s not a quick move in any of those cases and we had done a lot of the work to try to diversify those already,” Barry said in the call. “We, of course, want to make sure that our prices are as competitive as possible. But across the industry, this is going to be an issue.”
The good news is that Best Buy carries about a “six-week supply” of inventory, according to Barry. So the price increase won’t arrive overnight. It’s also possible that vendors will try to absorb some of the tariff costs to keep their prices competitive.