[NEW YORK] Walmart is continuing to push Chinese suppliers to cut prices to offset US President Donald Trump’s tariffs, even after Beijing officials summoned the US retailer’s executives last month to discuss the issue, according to sources familiar with the matter.
The world’s largest retailer has not backed down from its requests to suppliers to cut prices by as much as 10 per cent for each round of tariffs, essentially asking them to shoulder Trump’s duties, according to the sources, who asked not to be identified as the information is private.
Walmart’s unchanging stance even after being summoned by government officials – and warned by state-affiliated social media of potential retaliation from Beijing – reflects the quandary for Chinese companies as Trump’s tariffs add stress on top of the slowing domestic economy.
The ongoing negotiations, which are common for Walmart and its vast network of vendors, also show the lengths to which American businesses are going to offset added costs. These are only set to grow after Trump announces new reciprocal tariffs against major US trading partners this week, which would add to duties of 20 per cent that Trump has already implemented on Chinese imports.
Negotiations between Walmart and suppliers are happening across product categories, not by countries of origin, said a source familiar with the matter.
A Walmart spokesperson said the company’s conversations with suppliers are all aimed at offering low prices and that it will work closely with them to find the best path forward. Other US retailers, from Target to Costco Wholesale, have said tariffs will likely increase prices and that they would work with vendors. Items from clothes to home goods are expected to be especially affected by duties on goods from China, according to industry analysts.
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Some Chinese manufacturers are finding it difficult to meet Walmart’s demands to cut prices by as much as 10 per cent for each round of tariffs, according to the sources, who asked not to be identified as the information is private. The nature and stage of price negotiations vary by suppliers.
The challenging negotiations with the retail giant indicate Chinese exporters are likely to face tough conditions for some time to come. In an effort to maintain both their long-term relationships with US customers and their profitability, some Chinese factory owners say that they have begun to explore alternative manufacturing locations elsewhere in Asia, such as Cambodia and Vietnam.
Walmart has a strong foothold in China. Among factories, it’s seen as a coveted customer which can be counted on for steady and large orders. And Chinese consumers are flocking to its Sam’s Club membership stores, which on the mainland are known for premium cuts of meat and other high-quality foods.
Its longstanding presence in the world’s second-largest economy likely provides some measure of protection from political retaliation at a time when global businesses are laying off staff on the mainland or exiting the market altogether.
Though Yuyuantantian, a Weibo account affiliated with state-run China Central Television that regularly signals Beijing’s thinking about trade, had warned in a post in March that Walmart’s demands risks hurting the interests of both US and Chinese companies, China has not expressed displeasure towards the company since. The Commerce Ministry said last month that it had met with Walmart executives to discuss their negotiations with Chinese companies.
That’s in contrast to the heat being applied on CK Hutchison Holdings, whose deal to sell 43 ports, including the geopolitically sensitive Panama Canal ones, to a global consortium has met with fierce opposition from Beijing. BLOOMBERG
