The Consumer Shock From Tariffs Isn't Over. When Will Prices Peak?
2/15/202630 min
In this week's episode of WSJ’s Take On the Week, co-hosts Miriam Gottfried and Telis Demos are joined by Frances Donald, chief economist at Royal Bank of Canada, to break down the K-shaped economy, where different groups are thriving financially while others struggle. They ask: How could Walmart hit a trillion-dollar market capitalization despite consumer sentiment near record lows? Next, Donald analyzes what could be hiding the true health of the American household, from front-loading purchases ahead of potential tariffs to buy now, pay later programs.
After the break, Donald explains how the U...
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First 90 secondsTelis Demos· Host0:00
[upbeat music] Hey, Miriam.
Miriam Gottfried· Host0:03
Hi, Dallas.
Telis Demos· Host0:04
So I've got circled on my calendar for this upcoming week that Walmart is reporting earnings. Walmart, the newly minted trillion-dollar market cap company. Pretty exciting for a retailer, but here's the thing: how is Walmart hitting market cap records when all we talk about these days is the K-shaped consumer economy?
Miriam Gottfried· Host0:22
Right, and what that means is that the rich are getting richer while the poor are getting poorer, so why is Walmart booming?
Telis Demos· Host0:29
We really wanted to put some more meat on the bones of this kinda K-shaped economy conversation because some, some things make intuitive sense about it, some things don't. So we are joined today by RBC chief economist Francis Donald. Francis, welcome.
Frances Donald· Guest0:44
Well, thank you for having me.
Telis Demos· Host0:46
Why don't we start off by, why don't you tell us your definition of the K-shaped economy? 'Cause I think it means different things to different people. So what does it mean to you, and what is driving it?
Frances Donald· Guest0:55
So Miriam, you mentioned the rich are getting richer, the poor is getting poorer, and that is a standard sort of understanding of the K. And when you picture the K, you have that upper part that's rising and that lower part that's falling. Now, here's the bad news: that's actually always been true for several, several decades.
Miriam Gottfried· Host1:10
That's what I thought, actually.
Telis Demos· Host1:11
[laughs] That was one of our first questions. Like, when has it not been?
Frances Donald· Guest1:13
Yeah, exactly. So this is, this wealth accumulation to the top 10% is not a new phenomenon. What's a little bit different here, since about 20 and '23, is I want to picture, I want you to picture instead an E shape, which is that before about 2023,