Walmart hikes prices amid 145% tariffs; Economists warn of recession risk
Key Takeaways
- Walmart will raise prices due to increased tariffs of 145% on Chinese imports.
- Dalio advises the Fed against cutting rates, citing potential bond market and dollar impact.
- Home Depot beats sales but misses earnings; no price hikes planned despite tariffs.
- JPMorgan predicts European stocks will beat US stocks by a record 25% this year.
- US bank M&A is expected to accelerate in H2 2025, according to Morgan Stanley.
Top Stories
Walmart to raise prices due to 145% tariffs
On May 20, 2025, Walmart announced it would increase prices in response to tariffs, which have been hiked to 145% on Chinese imports. President Trump criticized the decision, suggesting Walmart should absorb the costs.
Tariffs, student loans, downgrade worry economists
On May 20, 2025, Economist Slok highlighted growing economic concerns, including the impact of the trade war on earnings, the resumption of student loan payments affecting credit scores, and Moody's downgrade adding risk to fiscal discussions. Average tariff rates have increased dramatically from 3% in January to 18%, projected to negatively impact GDP by -0.7% and potentially increase unemployment by roughly 0.5%. Weakness is migrating towards middle-income households, with retailers like Walmart and Subaru anticipating higher prices.
Dalio: Fed should not cut rates now
On May 20, 2025, Ray Dalio advised the Fed against cutting interest rates, citing the difficulty of balancing uncertainty and deteriorating sentiment with the actual economy. He warned that aggressive rate cuts could negatively impact the bond market, potentially driving up rates and causing the dollar to decline and gold to rise.
Home Depot beats sales, no price hikes planned
On May 20, 2025, Home Depot reported better-than-expected sales ($39.86 billion vs. $39.31 billion expected) but missed first-quarter earnings expectations ($3.56 adjusted EPS vs $3.60 expected) for the first time since May 2020. CFO Richard McPhail stated there are no plans to raise prices due to tariffs, while CEO Ted Decker cited high interest and mortgage rates as factors dampening home improvement spending. The company expects total sales to grow by 2.8% and comparable sales to rise about 1% for the full year.
JPMorgan: European stocks to beat US by 25%
On May 20, 2025, JPMorgan predicted that European stocks could outperform the US by a record 25 percentage points this year, amid persistent underperformance of US stocks relative to Europe in 2025.
US bank M&A to accelerate in H2 2025
According to Morgan Stanley analysts on May 20, 2025, mergers and acquisitions in the US banking sector are expected to increase in the second half of 2025 as recession fears decrease and the regulatory environment shifts.
Economic Trends
California feeling 'Trump slump' economic effects
On May 20, 2025, it was reported that California is already experiencing the effects of the "Trump slump," an economic slowdown linked to the American president's policies.
US Deposit Insurance Fund Target Ratio on track for 2025
On May 20, 2025, reports indicated that the US is on track to meet its Deposit Insurance Fund Target Ratio by the end of 2025.
Market Insights
ECB's Knot: Another rate cut possible in June
On May 20, 2025, ECB’s Knot indicated that another interest-rate cut in June could not be ruled out.
Pimco: Fed in wait-and-see mode on tariffs
On May 20, 2025, Pimco's Clarida stated that the Fed is in a wait-and-see mode, emphasizing that actions will be data-dependent and not preemptive; John Williams mentioned that September might provide a clearer view of the impact of tariffs. Clarida noted that inflation has been above target for four years and that the US is on an unsustainable fiscal path.
Banks launch €1B high yield bond sale for Mehiläinen
On May 20, 2025, it was reported that banks are set to launch a €1 billion high yield bond sale for Mehiläinen.
Taiwanese investors face currency losses
On May 20, 2025, reports indicated that Taiwanese investors are experiencing currency losses due to the appreciation of the Taiwanese dollar. Ryan Chang of CTBC Investments estimates that these investors have suffered roughly 11-12% losses in May 2025 due to US bond losses and the currency depreciation of the Taiwanese dollar.
AI & The Economy
Europe must commit to AI: Antonin Bergeaud
On May 19, 2025, Antonin Bergeaud, laureate of the 2025 Prize for best young economist, stated that Europe must fully commit to artificial intelligence.