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Walmart is reportedly standing firm in its demands that Chinese suppliers absorb the costs of U.S. tariffs.
Bloomberg, citing sources with knowledge of the situation, said Walmart (WMT0.00%) is asking suppliers to reduce prices by up to 10% for every new round of tariffs, effectively shifting the financial burden onto manufacturers. Last month, Chinese officials met with Walmart executives to discuss the request, calling it irresponsible and unfair. Despite this, Walmart appears unfazed and has doubled down on its demands.
Walmart did not immediately respond to Quartz’s request for comment.
Notably, Walmart’s negotiations are taking place throughout a range of product categories, not just those from China, sources told Bloomberg. However, some Chinese manufacturers are struggling to meet Walmart’s demands. Suppliers, especially in industries such as kitchenware and apparel, have voiced concerns that further price cuts could hurt their already slim profit margins. Meanwhile, the U.S. government’s 20% tariff on Chinese imports affects roughly $430 billion worth of goods.
So far, only a few suppliers have agreed to Walmart’s price reductions. Others, however, are refusing to accept cuts beyond 3%. A Walmart spokesperson previously told Quartz that it was working with suppliers to find solutions, while still prioritizing its goal of keeping prices low for its consumers.
With over 330 locations in mainland China, Walmart’s influence in the region is significant. Its push for price cuts comes as the retail industry faces mounting pressure from the continuing U.S.-China trade war. With U.S. consumers expected to bear much of the financial burden from these tariffs, Walmart’s stance could signal wider challenges ahead. CEO Doug McMillon has previously noted that U.S. shoppers on the “lower end of the scale” are increasingly opting for smaller packaged goods.
Walmart isn’t alone in pushing suppliers to absorb some of the tariff costs. Other major retailers, including Target and Costco, are following suit. Target (TGT0.00%), for instance, asked a supplier of hairpins and claw clips to take on “half the costs of the tariffs.” The supplier said the failed negotiation led to delayed orders, eventually losing the business. Target has not responded to Quartz’s multiple requests for comment.
Target CEO Brian Cornell has stated that the retailer has reduced its reliance on Chinese imports by cutting the share of its goods from China from 60% to 30%. Although the company doesn’t have physical stores in China, Target is following Walmart and Costco’s (COST0.00%) lead in asking suppliers to absorb some of the tariff burden.
A supplier for Costco told the Financial Times that larger suppliers can handle the extra costs but smaller ones risk being squeezed — and ultimately, “screwed.” Costco has yet to respond to Quartz’s request for comment.