Among sales introduced by trade tariffs, U.S. retail chain targets have cut expectations for a year after a sharp drop in sales.

Its sales fell 5.7% in the three months to May after the company's previous decision to end its diversity, equity and inclusion (DEI) target.

The boss refused to confirm any potential price increase due to the increase in import taxes, saying raising prices could be a "last method."

Target CEO Brian Cornell said the pricing decision will depend on retailers’ efforts to source more products in the U.S. and reduce their reliance on China.

"This will play a very important role," he said.

Unlike its rival Walmart, which generates most of its revenue from selling grocery products such as bananas, milk, toilet paper and shampoo, Target's big sellers come primarily from non-essential goods such as home furniture and beauty products.

It sourced most of this product from China, with 30% of its store labeled items coming from the country. That's down from 60% in 2017, but analysts say the impact of higher import tariffs on goods from the country will be difficult to navigate.

Since returning to the White House, U.S. President Donald Trump has tried to encourage businesses and consumers to buy more American-made goods, thus imposing tariffs on many countries.

Trump hopes his policies will help boost U.S. manufacturing and jobs, but economists warn that this could lead to higher prices for customers.

The United States and China have agreed to a truce to reduce import taxes on goods traded between the two countries, which has lowered the trade war between the world's two largest economies, but the U.S. import tax on China is still higher than 30% before.

Rick Gomez, the company's chief business officer, said Target hopes to negotiate with suppliers and expand its supplier count outside of China and adjust the time and quantity of orders.

"These efforts are expected to offset the vast majority of gradual tariff exposures," he said.

Walmart revealed last week that it would raise prices due to tariffs, prompting Trump to say supermarkets should "eat tariffs" on imported goods rather than passing costs.

Target said Wednesday that it now expects a low unit volume of annual sales to fall. It previously predicted a net sales growth of about 1%.

In January, Target announced that it would end its DEI target.

The Trump administration opposes such policies, which has led many major companies to cut initiatives.

The chain was sued earlier this year by a group of shareholders of the Florida Riviera Beach Police Pension Fund, which ruled that Target deceived them, allegedly covering up risks associated with its policies.

The lawsuit mentions strong opposition to LGBTQ+ merchandise in its stores in 2023, which has led to a decline in its sales and share prices and has led to boycotts.

Mr Cornell said some reversals of DEI policies played a role in the performance in the first quarter, but he could not quantify the impact.