Shoppers could see production prices rise in the coming days due to President Donald Trump’s tariffs on Mexican imports. target CEO Brian Cornell said Tuesday.
The Trump administration’s 25% collection of goods from Mexico and Canada and a 10% mandate on China’s imports came into effect Tuesday.
Cornell said Target has relied heavily on Mexican produce for the winter, and tariffs will allow for increased prices for fruit and vegetables this week.
“These are categories that try to protect pricing, but consumers will see prices rise in the coming days,” he told CNBC in an interview after Target announced its fourth-quarter revenue.
“If there is a 25% tariff, those prices will rise,” Cornell added.
Cornell said prices could rise for agricultural products such as strawberries, avocados and bananas.
During the investor’s day that morning, top commercial manager Rick Gomez said “the team is working in real time” and that it is too early to provide more details on products and categories where price increases are seen, and that the company needs to consider prices comprehensively.
“Give me an example. I have $3 for Christmas ornaments. I don’t want to have a $3.60 Christmas ornament. I want to keep it at $3.00. I mean, I have to think about margins elsewhere.
Another example he cited was Target’s “$5 Tea.” The company wants to continue charging $5 flats on its T-shirts. So, while the price may not change, there is more flexibility to raise the price of other products such as dresses.
“So I might look at the dress a little differently,” Gomez said. “It’s not really as simple as flowing through costs. You need to think about this from a consumer perspective, make sure the pricing architecture makes sense, and put us where there are competitive and affordable options.”
Target Corporation CEO Brian Cornell will speak in an interview on the floor of the New York Stock Exchange on November 28, 2014.
Brendan McDermid | Reuters
Inflation has eased over the last few months, but prices have not been eased as much as the Federal Reserve hoped. High costs of food and housing continue to stretch consumer budgets, and Trump’s tariffs have raised concerns that households will face even higher costs. The president and his advisors argue that the duties will not raise consumer prices.
When asked if he spoke directly to Trump about the impacts involved in price, Cornell told CNBC that he “hasn’t had that conversation” with the president, instead relying on the retail lobbying sector on behalf of Target.
“We are certainly very aggressive in Washington, and we make sure we are offering our perspective, and we rely on (the national retail federation) and the industry to provide perspective to members of the wider administration,” Cornell said. “So we’ll work very closely with (NRF and The Retail Industry Leaders Association) to make sure we’re hearing our voices and share our insights and potential meanings.”
When asked about China, Cornell downplayed concerns about how a cumulative 20% obligation on goods from the region would affect shoppers. Cornell said the target reduced dependence on China from over 60% to about 30%. Gomez said it’s pace to cut that number below 25% by the end of the next year.
The company was able to reduce its dependence on China by turning its eyes to emerging manufacturing markets in the Western Hemisphere. Currently, only 17% of the target apparel (the company’s main margin category) is produced in China after being produced in countries like Guatemala and Honduras. Changes in the supply chain are key to delivering products to customers faster, and do not involve concerns about the same raw materials associated with Chinese cotton sourcing.
Cornell’s comments came after Target posted fourth quarter revenue and revenue, breaking through Wall Street’s expectations, but threw poles this quarter. The company said it has weakened some due to weaker current quarter due to consumer trust slippage, which fell to its lowest level in February since 2021, as well as how tariff concerns are affecting shopping.
Target’s guidance is the latest warning signs on economic health. Walmart, The beauty of the elf and Home Depot Giving quarter or full-year guidance that is weaker than expected.
