Before the Liberation Day tariffs were imposed on April 2, grocery giant Albertsons sent a letter to its suppliers, noting the potential economic challenges ahead. “We understand this situation may raise concerns for your business operations and the ongoing relationship we share,” stated Albertsons executive vice president and chief merchandising and digital officer Omer Gajial, who wrote that he wanted to “clarify” Albertsons’ policy regarding the tariffs. “We are committed to maintaining the value proposition our customers expect,” Gajial continued. “Therefore, with few exceptions, we are not accepting cost increases due to tariffs” (emphasis in original). In other words, regardless of higher supplier costs from components of their goods sourced from China or other countries, they would have to absorb those increases if they want to sell to Albertsons. Tariff costs could not be included in invoices without prior authorization, Gajial said. Albertsons offered suppliers a way to request cost increases due to tariffs, but they would have to give 90 days’ advance notice, submit a formal request with a detailed explanation with import duties and other relevant documentation, and allow 30 more days for review and approval. That means that even under the best-case scenario, suppliers would have to eat four months of cost increases before Albertsons would decide on any allowances. And “approval is not guaranteed,” the letter states. More from David Dayen Grocery suppliers whose sourcing or manufacturing is overseas have clearly incurred costs on its products, but hardball like this would mean they would have to compensate for losses with other retailers, perhaps ones where the power relationship is reversed. Albertsons holds a significant market share in the grocery market, particularly in the western United States. Competitors like Walmart and Kroger are even bigger (Albertsons unsuccessfully tried to merge with Kroger last year), and armed with more market power, they could and likely will seek similar deals. Independent grocers, however, typically don’t have the same ability to dictate terms to suppliers, and therefore will have to take whatever they can get. This dynamic is sometimes known as the “waterbed effect,” where pushing down prices in one part of a market system can lead to increased prices elsewhere. Amazon is being sued by the Federal Trade Commission for a similar type of conduct; forcing third-party sellers to offer the lowest price ends up raising prices across other competitors, the complaint alleges. Albertsons did not respond to a request for comment. Walmart and Kroger did not respond to queries of whether they were also seeking to freeze supplier rates. The Prospect reached out to several large grocery suppliers, including Kraft Heinz, Unilever, and Procter & Gamble to see if they would be formally requesting cost increases from Albertsons; they did not respond. The situation is just one example of how Trump’s tariffs can facilitate monopoly, and there are many others. Special exemptions for well-heeled companies with sharp lobbyists are unavailable to smaller businesses. Opportunistic firms with the ability to mitigate the tariff impact can raise prices more than their own increases in costs. Crumbling supports for smaller businesses at the very moment they need them because of the economic turmoil could entrench large corporations even further. “We saw this playbook unfold during the pandemic,” said Lindsay Owens, executive director of the economic research firm Groundwork Collaborative. “Big corporations will throw their weight around to preserve their margins for as long as they can—until the suppliers go under or there are no more small businesses to subsidize them.” PRESIDENT TRUMP’S EXEMPTION from the new reciprocal tariffs for smartphones and computers over the weekend elicited a huge sigh of relief from Apple (the largest company in the world), whose supply chain has been hardwired to China for many years now. The 125 percent tariffs on iPhones and MacBooks from China are now gone, though a 20 percent tariff imposed earlier is still operative. However, if Apple or another electronics firm places a battery made in China inside a computer made in another country, it would be able to export to the United States duty-free. Apple CEO Tim Cook donated $1 million to Trump’s inauguration and spoke to Trump at the White House recently. Tariff exemptions on Apple’s made-in-China electronics were also granted during Trump’s first term. And Trump has said outright that he would consider exempting entire companies from tariffs. Companies that made bigger donations to Republicans received more exemptions from Chinese tariffs imposed by the U.S. trade representative during Trump’s first term in 2018. Micron, Dell, Nvidia, and other massive companies that manufacture in China are among the big winners of this initial move. Needless to say, large companies with more lobbying resources can afford to play the games necessary to extract exemptions from Trump. Smaller companies, or ones in other industries than electronics, will simply be shut out of that favor-trading. Small businesses account for one-third of U.S. imports, according to The Wall Street Journal. A small producer of chai tea or backpacks, or an Amazon seller, simply will not be able to avoid the cost hike from tariffs, nor will they be able to shove the burden onto someone else. A company like Amazon, by contrast, has the resources and clout to preorder inventory, or force its partners to take losses. “A lot of little businesses are going to go away,” the president of Nils Skiwear, which makes apparel for the slopes, told the Journal. When smaller companies go under, other businesses will take that market share, and by definition that will consolidate markets. Harming smaller companies more are the impacts from Trump’s ham-fisted approach to tariffs on domestic manufacturing, one option for those companies that could shift production. In the electronics exemptions, manufacturing components will face high tariffs, while finished goods from abroad will not. There will apparently be a different set of tariffs on semiconductors and perhaps other inputs later. But for the time being, domestic manufacturing will struggle to compete. That could get even worse with the announcement that China will impose export controls on rare earth minerals and magnets into the U.S. This could grind U.S. factories making automobiles, aerospace, defense, and semiconductors to a halt. China cut off rare earths from Japan over a South China Sea dispute in 2010, yet the U.S. did nothing in the intervening 15 years to prepare for the Chinese monopoly on refining these minerals, which despite the name are actually pretty abundant. Without domestic alternatives and with little time to change course, many small and medium-sized businesses are in trouble. One example of a midsized retailer scrambling to deal with the new environment is Five Below, a discount retailer with 1,800 outlets in the U.S., which recently announced it would stop shipments from China due to tariffs. Elsewhere, shipments of furniture, toys, apparel, and other goods made in China have been halted, with some damage, especially to smaller businesses, seen as “irreversible.” Some retailers and producers are adding “tariff fees” as a separate line item on a customer’s shopping receipt, to at least inform people why prices are going up. But while this could raise pressure to reverse the tariffs, it likely won’t stop consumers from seeking better deals or going without. And smaller businesses simply do not have the kind of balance sheets that can weather such a storm. Some large retailers could also use rising inflation expectations to expand profits by raising prices above the increased input costs caused by tariffs. A tariff is typically imposed on the wholesale rather than retail price; if it cost $10 to make a pair of sneakers in China, even a 145 percent tariff comes out to only $14.50, for a product that could sell for as much as $150 in the U.S. You could imagine a retailer raising the price even higher and pocketing the difference. In the case of an Albertsons, which made special deals to force suppliers to take the costs, any price increase would reflect a pad on profits. During the pandemic, grocery chains also forced suppliers to give them additional allocations or other deals, and grocery chain profits increased, according to a 2024 FTC report. “We are VERY concerned the independents will be disproportionately impacted,” said Chris Jones, a government relations officer for the National Grocers Association. Even some Trump administration officials have acknowledged the potential for big-box retailers to game the system. “Inflation gave companies cover to do things that were really harmful to American society,” said Roger Alford, principal deputy assistant attorney general for the Justice Department antitrust division, at a conference in Chicago last week. “I think tariff increases give people opportunities to engage in harmful conduct.” Special retailer deals with suppliers regarding tariffs could potentially violate the Robinson-Patman Act, a 1936 law that was left effectively unenforced for decades before two FTC lawsuits revived it. The law states that suppliers must offer the same discounts to all retailers regardless of size, in an attempt to avoid the “waterbed effect” of smaller retailers being priced out of the market. Small businesses that may need a government lifeline to bridge the gap to finding a new business model may not be happy to know that the Small Business Administration is reducing its workforce by 43 percent. Even in the best of times in recent years, the SBA has found it hard to keep up with demand for assistance; during an emergency like the tariff fallout, small proprietors could be shut out of help entirely. The SBA did not respond to a request for comment. The Trump tariffs in particular, with their across-the-board impact, and clear invitations to potentially corrupt deals for exemptions, lend themselves to this consolidation and control within the economy. It may not be the point of the tariffs, but for big companies it’s certainly an enticing by-product.