Even America’s go-to grocery giant isn’t immune to the economic weather. Costco posted a mixed bag for its second quarter, admitting that tariffs have been a bump in the road—but the company’s staying optimistic. Thanks to its global buying muscle and solid ties with suppliers, it’s aiming to keep price hikes in check.

So, what’s the scoop?

During the earnings call, CEO Ron Vachris put it simply: “When it rains, it rains on everyone.” In other words, tariffs are giving everyone a headache, not just Costco.

Roughly one-third of the retailer’s U.S. sales come from imported goods, and of that slice, under half is shipped in from countries like China, Mexico, and Canada. That means a good chunk of their products could end up wearing the tariff price tag—call it a tax on bulk buying.

The CEO doubled down on Costco’s plan to tackle the pressure, saying they’ll lean on their “global buying power, solid supplier connections, and a little creative thinking” to keep things rolling.

Gary Millerchip, the company’s executive VP and CFO, chimed in with Costco’s price game philosophy: “We aim to be the first ones to cut prices when we can—and the last to raise them when costs go up.” In other words, they’re willing to eat some of the rising costs to keep those bulk deals looking tasty.

The leadership also broke down how Costco’s flexible merch game—nicknamed the “Treasure Hunt” approach—helps them swap out or replace products when needed. That clever tactic acts like a safety net when tariffs hit specific items. So if you don’t find what you came for, there’s probably another surprise waiting in aisle seven.

Still, the execs admitted there are some areas where they may have no choice but to pass on a bit of the cost—especially when it comes to fresh foods, where profit margins are already sliced pretty thin. Lettuce not forget, produce pricing is a delicate balancing act.

Vachris also mentioned that the tariff landscape is changing faster than a cart in the snack aisle. “But we’re ready,” he said, assuring that Costco is “geared up to cut prices and hold off on raising any where we can.” Talk about having a plan in the pantry.

Earlier in March, President Donald Trump slapped a 25% tariff on goods from Canada and Mexico and bumped tariffs on Chinese products up to 20%. He later eased off on a few items but promised “reciprocal tariffs” on all trade partners starting April 2nd. It’s been a bit of a tax tango.

With all the back-and-forth on trade, companies like Costco are bracing for impact. When tariffs start flying, everyone in the supply chain feels the pinch—wholesale headaches included.

A market reliant on imports

Meanwhile, Costco has reportedly been nudging suppliers in mainland China to bring their prices down to help soften the blow of U.S. tariffs, according to The Financial Times. Two suppliers spilled the beans—sounds like even bulk buyers are bargaining hard.

This move comes right on the heels of Chinese officials sitting down with Walmart earlier this month after media reports claimed the retail giant asked its Chinese suppliers for some serious markdowns to help cushion the tariff hit. Seems like price-cutting season is in full swing on both sides of the Pacific.

Costco CEO Ron Vachris mentioned during this month’s quarterly earnings call that if tariffs start making prices climb too high, the company might shake up its international supply chain. When the cost of doing business goes up, sometimes you’ve got to reroute the cart.

Vachris explained that roughly a third of what Costco sells in the U.S. comes from overseas. And of that slice, less than half is shipped in from China, Mexico, and Canada. So while they’re not totally tied to those countries, a tariff spike could still cause a serious dent in the price-per-pallet game.