There’s something fascinating happening in retail right now that most TV talking heads are missing. While headlines scream about tariff apocalypse, two household names are quietly positioning themselves for what could be their most brilliant strategic play in years.

Let’s break down why the current tariff situation might actually boost both Home Depot and Walmart’s bottom lines. What’s clear is President Donald Trump set himself up as the scapegoat in either case in the minds of consumers …everything is so loud, all the time…he will take all the arrows, then the retailers can read the mood in the room to their advantage.

Home Depot’s Memorial Day Gambit

Home Depot’s Memorial Day Gambit

When Home Depot announced they wouldn’t pass along tariff costs to consumers, most observers saw it as a simple PR win. But watching them for years, I see something much more calculated at play.

Home Depot isn’t just being the “good guy”—they’re executing a perfectly timed strategic maneuver as we enter Memorial Day weekend, traditionally one of their highest-volume periods of the year. This weekend kicks off their critical summer season where lawn, garden, and outdoor living departments shine.

Here’s what makes this brilliant: these seasonal departments typically:

• Deliver margins 4-6 points higher than store average
• Have significantly lower tariff exposure than other departments
• Drive substantially higher basket sizes during May-July

By absorbing tariff costs (which primarily impact other departments), they’re creating a halo effect during precisely the season when consumers are spending most heavily in their highest-margin, lowest-tariff-exposed categories. The math simply makes sense. If you can get consumers into the stores, particulary higher income consumers, their mindset is Home Depot is the best deal for these products…so market basket will go up as well.

And let’s not forget context—Home Depot has been battling some serious headwinds. With mortgage rates hovering near multi-decade highs, their core business tied to housing turnover has taken a beating. Their comparable store sales have been softer than usual, creating pressure to drive transactions during this critical season.

Their “no tariff price increases” stance isn’t charity (although consumers will perceive it that way)—it’s brilliant. They’re essentially investing marketing dollars directly into price perception exactly when seasonal tailwinds will more than compensate for any margin compression in tariff-affected categories. During a tough period financially, they have repositioned themselves as the low-price leader when compared to Lowe’s, Menard’s, Walmart and others.

Walmart’s Expectation Management Masterclass

Meanwhile, Walmart is playing an entirely different (but equally brilliant) game of retail chess. I’m not 100% sure this was the intent when the CFO mentioned prices will need to rise on “some” items due to tariffs, but let’s look at the opportunity.

Consumer psychology research consistently shows people fear the worst during uncertainty. With tariff headlines generating anxiety about 20-30% price increases, Walmart has the perfect opportunity to manage expectations downward. And the talking heads never factor tariff costs through an actual income statement. 20% tariff means prices need to go up 20%…No, they don’t. But it does set the value in consumer’s minds.

Let’s run the actual numbers that most talking heads are missing:

• Approximately 38% of Walmart’s merchandise is exposed to new tariffs in their latest filing.
• The blended tariff rate on affected goods averages around 17% across the economy according to Jeremy Segal (Wharton Professor on CNBC – thought not specifically Walmart or retail, across the economy)
• When distributed across their entire assortment, the actual cost increase can be substantially diluted

My calculations suggest Walmart only needs a 5.7% price increase across the board to fully cover increased costs and maintain current margins. But when customers are expecting 20-30%, rounding up to 10% nearly doubles net profit. Walmart is seen as the hero by only increasing prices half of what consumers expect. Trump is the bad guy. Consumers expecting 20-30% hikes will view single-digit or 10% increases as a relief, not a burden. Further as a low-cost leader and a retailer others trade down to, Walmart has pricing authority that no other physical retailer offers.

And here’s where it gets interesting—Walmart has been steadily growing its share of higher-income shoppers (households earning $100,000+) who are less price-sensitive. These customers who’ve traded down from specialty retailers provide additional margin cushion to absorb some costs while still delivering earnings growth.

The administration’s tariff policy gives Walmart the perfect external factor to attribute any price increases to—something retailers rarely get. When prices inevitably rise (though less than feared), consumers will blame trade policy, not Walmart’s pricing strategy. 

Further, no retail company other than Amazon is benefitting more from AI deployment.

Some other good new no one is talking about

What no one adds to the discussion is the impact of lower fuel prices. At the moment we are running about 14% less at the pump for both unleaded and diesel fuel from a year ago. Further, crude oil prices for the last 35 days have been running at rate that would equate to $1.84 a gallon nationally. For the average family this is $80-100 less they are spending on gas. Further, because of the diesel drop as well, the cost of distribution related to truck operating costs is dropping rapidly as well. It’s too complex to work it all out, but this is good news for consumers to absorb price increases in goods and as well it helps retailers absorb more of the tariffs without absorbing the full impact on the bottom line.

H3 Competitive Advantage Timeline

The Competitive Advantage Timeline

Both Home Depot and Walmart are effectively creating valuable competitive positioning that will play out over distinct timeframes:

Short-term (30-90 days): Home Depot captures disproportionate seasonal spending during their highest-margin period by being the “consumer champion” right when it matters most.

Mid-term (3-6 months): As tariff impacts normalize across retail, Walmart emerges looking reasonable with modest price increases compared to competitors who may have overcorrected with larger hikes.

Long-term (6+ months): Both retailers solidify consumer loyalty through perceived price restraint during a challenging economic period, potentially gaining lasting market share from competitors who mishandled their tariff response.

Bottom Line

For all of us watching this space, these nuanced pricing strategies reveal something crucial about retail leadership: the best operators don’t merely react to external pressures—they transform them into competitive advantages.

Home Depot and Walmart are demonstrating retail strategy at its finest—turning what could have been a universal negative into a strategic opportunity. While other retailers are still scrambling to determine their tariff response, these two have already positioned themselves to emerge stronger, by leveraging the promotion and tweets from the president.

The coming quarters will reveal whether these calculated gambles pay off, but the early indications suggest we could be watching a masterclass in retail strategy unfold in real-time. Self-help literature always states, “Life is 10% what happens to you and 90% how you react to it.” The moves of Walmart and Home Depot show two different ways that should lead to financial success.