Photo: Joe Raedle (Getty Images)

Walmart (WMT) has acted as a deflationary force in the U.S. economy for decades, using its massive scale and supply chain dominance — especially with low-cost Chinese manufacturing — to push prices down across retail. By demanding rock-bottom prices from suppliers and passing the savings on to consumers, it helped suppress inflation in categories across the board, from socks to shampoo.

The effect was very real. In the 1990s and 2000s, economists often credited Walmart with shaving basis points off national inflation rates. Studies from the NBER and the Minneapolis Fed found that Walmart’s presence consistently lowered prices by 10-25% on household staples, generating measurable gains in consumer welfare even as the retailer’s effects on the overall economy were more mixed. Some estimates put the average household’s annual savings from Walmart’s price pressure at more than $700.

Such savings created an irresistible lure for customers, helping make Walmart the world’s largest retailer by revenue.

Now that era may be over

Walmart confirmed Thursday that it would raise prices later this month and into the summer, citing rising costs from tariffs. It’s the culmination of warnings CFO John David Rainey has been issuing for months. “The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” Rainey said on Thursday.

While inflation cooled to a four-year low of 2.3% in April, economists now expect it to rebound to 3.3% over the next year, driven in part by importers like Walmart reaching the end of their ability to absorb cost increases. As Rainey first noted last fall, tariffs combined with currency shifts are squeezing margins in ways that can no longer be ignored.

The warning landed just weeks after Walmart pulled its near-term guidance on April 9 — seven days after President Donald Trump’s “Liberation Day” tariff rollout upended global trade. While the company reiterated its full-year outlook on Thursday, it’s withholding profit guidance, citing the now-familiar “dynamic macro environment.”

Yet even as costs rise, Walmart continues gaining ground. Last quarter’s grocery market share growth was led by upper-income households — wealthy shoppers trading down because they’re affected by early signs of a recession, or simply afraid one’s set to begin.

Walmart’s decision opens the floodgates for ‘everybody else’

In the same way its pricing once set the tone for the broader retail sector, pressuring rivals to follow suit, Walmart’s shift to raising prices allows other retailers and major brands to follow suit.

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Speaking to The Wall Street Journal (NWS), Harvard economist Jason Furman called it a turning point: “This isn’t Walmart taking advantage. It’s Walmart having no choice.”

“That tells me that they are more afraid of their own customers and their reactions than they are of Donald Trump and his reaction,” Furman added.

For consumers, the result may be unavoidable. A retailer that once defined the low-price era is now helping usher it out.

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