The anti-Walmart effect

Tony Sutton

Sintra Capital

China’s entry into the World Trade Organisation in 2001 saw an explosion of Chinese imports into the US (see chart). It is estimated that between 2001 and 2006 Walmart accounted for approximately 9.3% of total US imports from China. The concept of importing goods, exporting jobs and the associated impacts on local economies became known as the ‘Walmart Effect’. This served to keep wages low and suppress inflation.

Due to a host of geo-political reasons, the opposite (de-globalisation) is currently happening.

As an example, last week President Biden signed into law a bill that includes US$52 billion of incentives for US companies to produce semiconductors and invest in chip making. Semiconductors are an essential component of electronic devices including cars, household appliances, smartphones, computing, medical equipment and internet communications. Manufacturing these components in America will increase their cost. How much will this impact the price of an iPhone? Or a washing machine?

This example is the tip of the iceberg as America seeks to reduce its reliance on other countries - at a time when their unemployment rate is at multi-decade lows.

The inflationary pressures of de-globalisation will play out gradually over the next 5-10 years. Despite rising interest rates, a return to the low inflation era of the 2000s and 2010s is highly unlikely. 

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Sintra Capital Pty Ltd believes the above information is accurate at the time of compilation. However, no warranty is made as to the accuracy or reliability of any estimates, opinions, conclusions, recommendations or any other information contained in this note and any attachments. Sintra Capital Pty Ltd disclaims all liability and responsibility for any loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this information.

Tony Sutton
Portfolio Manager
Sintra Capital

Tony has extensive experience in international equities having worked in both London and Australia. Tony was formerly senior portfolio manager and head of international equities at K2 Asset Management (2016-2022). Prior broader market roles...

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