Retailers Under the Tariff Truce: Spotting Winners in the Trade Standoff

The 90-day tariff truce between the U.S. and China, announced on May 11, offers a fleeting reprieve from a trade war that once threatened to empty store shelves and spike prices. For retailers, this pause is a critical window to reset supply chains, renegotiate terms with suppliers, and fortify margins—actions that could determine their financial resilience when tariffs resume. In this analysis, we dissect how Walmart (WMT), Target (TGT), and Home Depot (HD) are leveraging the truce to their advantage, while highlighting which stocks present compelling investment opportunities—and which remain vulnerable to post-pause turbulence.

The Tariff Truce: A Lifeline, Not a Cure

The temporary reduction of U.S. tariffs on Chinese goods from 145% to 30% and China’s retaliatory cuts from 125% to 10% buys time for retailers to recalibrate. However, the 30% rate remains a ceiling for future hikes, leaving little room for complacency.

The chart above underscores the sector’s volatility: while Walmart has held up relatively well (+1.5% YTD), Target and Home Depot lag, down 8% and 29%, respectively. This divergence hints at stark strategic differences.

Walmart: The Playbook for Proactive Play

Walmart’s edge lies in its scale, diversification, and foresight. Here’s how it’s capitalizing on the truce:
1. Supplier Renegotiation: Walmart has leveraged its purchasing power to secure long-term pricing agreements with Chinese manufacturers, absorbing some tariff costs to avoid passing them to consumers. This strategy aligns with its “lowest prices always” brand promise, which retains pricing power.
2. Automation and Efficiency: The retailer aims to cut online fulfillment costs by 30% by year-end via automation. With 28% growth in its retail media business (advertising revenue on Walmart.com), it’s diversifying into high-margin adjacencies.
3. Global Footprint: Despite U.S.-China tensions, Walmart’s 336 stores in China give it leverage to negotiate terms on both sides.

Investment Case: Walmart’s 1.6% dividend yield and margin stability make it a defensive play. Look for catalysts in Q2 earnings, where its automation progress and media revenue could surprise to the upside.

Target: Supplier Diversification or a Cost Crisis?

Target’s strategy hinges on reducing China dependency and dynamic pricing, but execution risks linger:
- Supply Chain Shifts: Target has boosted sourcing from Vietnam and Mexico to 15% of new contracts, but higher initial costs and longer lead times could delay ROI.
- Margin Pressures: The company absorbed tariff costs in early 2025 but now faces a 3–5% comparable sales decline, signaling consumer trade-downs to cheaper competitors.

The drop in gross margins reflects its struggle to balance cost absorption and pricing discipline.

Investment Caution: Target’s stock is undervalued at 12x forward earnings, but its reliance on apparel and discretionary goods makes it vulnerable to post-pause tariffs. Investors should wait for clearer supplier diversification wins.

Home Depot: Housing Blues Overshadow Tariff Risks

While tariffs are a concern, Home Depot’s bigger problem is the housing market. With U.S. comparable-store sales down 3.2% in Q1, falling home sales and high mortgage rates are damping demand for tools and DIY supplies.

• Tariff Mitigation: The company renegotiated contracts with suppliers to include price adjustment clauses, but its broader exposure to the housing cycle limits upside.
• Inventory Risks: A 29% YTD stock decline reflects skepticism about its ability to recover margins amid slow housing growth.

Investment Verdict: Avoid unless housing data improves. Its 1.8% dividend yield offers some comfort, but the sector’s headwinds are too strong.

Actionable Investment Takeaways

1. Buy Walmart: Its automation investments, China leverage, and retail media growth make it the best-positioned retailer to navigate post-pause uncertainty.
2. Watch Target: A rebound requires proof of supplier diversification and margin stability—hold off until Q2 earnings.
3. Avoid Home Depot: Until housing demand stabilizes, its stock remains tied to an underperforming market.

Final Call: Time to Double Down on Walmart

The tariff truce is a temporary fix, but Walmart’s proactive moves to lock in supplier terms and diversify revenue streams position it to thrive long after the truce expires. With a stable dividend, margin resilience, and a clear path to cost-cutting, this is a buy now opportunity.

Target and Home Depot, meanwhile, are wait-and-see plays—hold cash for now and let the next earnings season clarify their paths. The trade war’s endgame is far from certain, but the retailers that win will be those that control their supply chains.

Act fast, but prioritize the retailers that are already winning.

This analysis is for informational purposes only and does not constitute financial advice. Always consult a licensed professional before making investment decisions.