Target says it can adapt and offset tariff costs, is reducing reliance on China

Target Corp. said Wednesday it can “offset the vast majority” of impacts from President Trump’s tariffs, as major retailers report earnings and outline plans for navigating an uncertain trade environment.

The Minneapolis-based retail giant said it fell short of first-quarter earnings estimates because of lower consumer spending, tariff uncertainty and boycotts over its decision to scale back diversity, equity and inclusion efforts.

On tariff impacts, Target said about half of what it sells is made in the U.S. and not subject to tariffs. Company officials said they can mitigate the cost of the levies on foreign-made products by negotiating with suppliers and switching the country of origin for its products.

“These efforts are expected to offset the vast majority of the incremental tariff exposure,” Rick Gomez, Target’s chief commercial officer, told investors on an earnings call.

For example, Target said it reduced its reliance on China, decreasing its share of China-made products from 60% in 2017 to 30% today, with plans to get below 25% by the end of next year.

Mr. Trump is imposing a 30% tariff on Chinese goods, a level that is higher than his blanket 10% tariff on all imports.

The administration could impose higher tariffs on specific trading partners if countries are unable to negotiate down the levies by early July.

Many large companies are adjusting their earnings forecasts or how they source their products, given the new tariffs.

Mr. Trump characterizes the tariffs as a tax on foreign nations, but importers pay the tariffs to customs officials and sometimes pass along the cost to consumers.

Walmart said it will have to raise prices by the end of May because the tariffs are too high to absorb.

Mr. Trump reacted furiously, saying Walmart should be able to “eat” the cost of tariffs.

Home Depot, the home-improvement behemoth, went in the opposite direction Monday, saying it planned to hold the line on prices.

“We don’t see broad-based price increases for our customers at all going forward,” Billy Bastek, Home Depot’s executive vice president of merchandising, told investors on a quarterly earnings call.

Target was less explicit about its pricing plans, pointing to uncertainty in the trade environment and its ability to adapt to various trade scenarios.

Executives at Lowe’s, a large home-improvement retailer, said Wednesday they plan to remain “really price competitive in the home improvement channel.”

The company said roughly 60% of its products are from outside the U.S. — led by China at roughly 20% — but that it has room to change its supply chains as the tariff framework impacts business.

“We’ve been working really hard over the last four or five years to diversify, just as everybody has,” said Bill Boltz, executive vice president of merchandising at Lowe’s.