iStock.com/Michael Vi
March 17, 2025
Is Walmart Bullying Its Chinese Suppliers?
China’s Ministry of Commerce held talks last week with Walmart as the U.S. retail giant reportedly requested price cuts from Chinese suppliers to offset tariff costs.
Yuyuan Tantian, a social media account linked to state broadcaster CCTV, in a post last week charged that it is “unreasonable for Walmart to require Chinese suppliers to bear all tariffs, which will disrupt fair competition and foreign trade order,” according to a CNBC translation of the Chinese report.
Walmart’s reported move “may create the risk of supply chain disruption and harm the interests of Chinese and American companies and American consumers,” it added, warning of further actions if the company fails to correct its course.
Chinese and American companies should “work together” to respond to U.S. “unilateral imposition of tariffs,” Chinese state media said.
At the meeting held last Tuesday, Chinese authorities reportedly told Walmart that asking suppliers to lower prices might violate contracts and could lead to legal consequences, according to The Wall Street Journal. The outlet added that CCTV wrote on social media that “if Walmart insists” on having suppliers cut prices, “then what awaits Walmart is not just talk.”
The WSJ said Walmart officials at the meeting promised to “find ways to avoid damaging the interests of the parties involved” and maintained that China’s supply chains remain “key to its global success.”
The talks come as a Bloomberg report from March 6 indicated that Walmart recently began asking some of its suppliers in China, including those who produce apparel and kitchenware, to cut their prices by up to 10% per round of tariffs following President Donald Trump’s move to increase his previous 10% tariff on all goods imported from China to 20%.
“The retailer has historically had strong bargaining power over its Chinese suppliers and requests for lower prices have mostly been met,” Bloomberg reported, citing people familiar with the matter. “But the scope of the recent requests [is] unusual and leaves manufacturers weighing whether to absorb the costs to maintain a longer-term business relationship.”
Walmart continues to rely heavily on Chinese manufacturing, though it has gradually begun shifting some production elsewhere in recent years. Reuters estimated that from January to August 2023, 60% of Walmart’s imports came from China, down from 80% in 2018.
In addition to concerns over manufacturing, Chinese officials suggested that the dispute could impact Walmart’s operations within the country, where the retailer runs approximately 325 Walmart and Sam’s Club locations.
CCTV said in its post, “The relationship between Walmart and its Chinese suppliers is definitely not one of you being ‘higher’ and me being ‘lower.’ On the contrary, precisely because most of Walmart’s products are produced in China, Chinese consumers can easily find alternatives.”
Walmart reported $5.1 billion of net sales in China in its latest quarter, up 27.7% from a year earlier. That was less than 3% of its global total revenue for the period.
Any pressure on Chinese factories comes amid thin margins. Speaking to Nikkei Asia, Cameron Johnson, senior partner at Tidalwave Solutions, a Shanghai-based supply chain consultancy, said, “The reality is there are a lot of factories in bad shape with low margins.”
However, he also said raising prices risks the ire of American consumers as well as Trump. Johnson said, “Walmart doesn’t want to be the company that Trump calls out for raising prices because of tariffs, so they are trying to force suppliers to eat it to some degree.”
Walmart executives have said they expect to be able to manage tariffs well despite uncertainties.
“We’re wired to try and save people money. So that will be our ultimate goal,” Walmart CEO Doug McMillon said on an earnings call last month.
Discussion Questions
How forceful should Walmart be in pushing for price reductions from Chinese suppliers to avoid raising prices on U.S. consumers?
Does China have much leverage over Walmart?
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Jeff Sward
Founding Partner, Merchandising Metrics
Mark Self
President and CEO, Vector Textiles
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
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Walmart is doing what Walmart always does: negotiate hard because of its scale. That’s business. It isn’t the job of government to interfere in the process – although, obviously, the Chinese government is interventionist by its very nature.
Hasn’t this been Walmart’s MO for decades?
In a sense it’s like an old gangster movie…”I made you, and I can ruin you, too,”. Because both are true. As I said in my own blog today, I’ve been railing against moving production offshore in our quest for lowest cost sourcing” for over 20 years. We created the economic powerhouse that is China, with Walmart taking the lead.
does china have leverage? Sure. Is it enough to bring Walmart down? Nope. I just hate this whole thing. You don’t turn on a dime. It took from 1975 to 2006 for us to move all our production offshore – there was a great documentary on HBO called Schmatta that tracks how it moved. Unfortunately it’s not streaming anywhere. But we did it. And the end of apparel quotas in 2005 finished the story entirely.
People are going to be hurting. This is no time to add more cost to day to day necessities. . So Walmart, negotiate away!
So WalMart, wants to be alone among all U.S. companies to avoid raising prices? Good luck with that.
This is being framed in geopolitical terms – for obvious reasons – but it might also be seen as a traditional Walmart-beating-its-suppliers-into-the-dust negotiation; WM may get some of what it wants, but it’s not going to get the white flag.
Walmart has significant leverage over China due to its massive global purchasing power. However, Walmart relies heavily on Chinese suppliers to supply most of its goods, so disruptions in supply could affect Walmart’s ability to keep shelves stocked. China possesses at least that much leverage.
To maintain a mutually beneficial relationship while addressing cost concerns, both parties must find a delicate balance.
Among Walmart’s strategies is to further diversify its supplier base to reduce its dependence on China, thus mitigating risk. In the meantime, Chinese suppliers should focus on improving their efficiency and innovation in order to remain competitive and attractive to Walmart.
In light of the above, Walmart’s efforts to diversify its supplier base may present several challenges, such as the difficulty of establishing new supply chains and the need to ensure that quality is consistent across different regions.
Walmart may look to regions such as Southeast Asia, India, and Latin America as potential sources for new suppliers. These areas offer growing manufacturing capabilities and competitive labor costs. Additionally, sourcing from these regions can help Walmart tap into diverse markets and reduce geopolitical risks associated with over-reliance on a single country.
Walmart always negotiates hard, so no one – and especially not the Chinese – should be surprised by Walmart’s attempt to reduce cost. Ultimately, China wants to keep supplying Walmart, and Walmart wants to keep buying 60% of its products from China. Switching suppliers, and/or finding US-based suppliers will take time to achieve and the cost/margin requirements Walmart needs to keep prices in their current range will be very difficult given that 20% tariffs were implemented on March 3. Both parties have an interest in finding some way forward, at least in the short-to-mid term. And even though China only represents less than 3% of Walmart’s total revenue, China remains a significant growth market that it has invested many decades cultivating. It opened it’s first store in China in 1996.
Walmart using its size for leverage should come as no surprise. In this case, they are trying to share the pain of tariffs with their vendors. Nobody wins if excessive price increases mean less business for everyone.
It’s not like Walmart has been bashful in it’s negotiations over the years. And I doubt the factories have been able to pad their prices by 10 percentage points up until now. So where are these margin points going to come from? Wages? Not exactly bountiful to begin with. Quality? Usually good to very good, but not a lot of room to trade down. Shipping? Forget about it. Tariffs are taxes, and they are not paid by the country of origin. Maybe a couple of pennies get squeezed at the factory level, but ultimately wholesale and retail prices go up. Tariffs become a consumption tax paid for by the consumer.
China and Walmart are hostage to one another. There’s not a long list of big customers that China can move to and there’s not a lot of open production elsewhere on the planet. Not in the short term. So the leverage sits with the customer. And in the most macro sense, Walmart may not feel the pain in this situation. They may actually gain market share as increasing prices everywhere else chase customers down the price chain.
I personally would love to see Trump call out a retailer, especially Walmart, for raising prices. Then let Walmart turn that into a very open and transparent conversation about the details of the math that led to the higher prices. It would quickly become obvious that it was a problem that never had to be a problem. And with an obvious solution.
Perhaps this is a sneaky way for WM to push a “buy American” position in its stores. China is great at making cheap stuff that ends up in landfills, maybe it is time to push for higher quality goods made here, supported by higher prices and wages.
I do have some “inside sense” about these meetings, which are well described in today’s narrative.
Basically, the message to Walmart was, “This is your problem, not ours.”
From a geopolitical angle, China would like to see U.S. retail prices reflect the tariffs.
The unstoppable force finally hit the immovable object.
If you have had any experience negotiating with suppliers, particularly overseas asian suppliers, you would know that if a supplier acquiesces to a demand for lower prices they will invariably raise their prices and/or lower the quality of their goods the next time around. Walmart has always succeeded in pressuring suppliers to hold or lower prices by offering increasingly larger order sizes. That tactic at some point runs out of gas. When all is said and done, Walmart isn’t going to lower its profit expectations nor will its suppliers. If this tariff stupidity continues, with each action resulting in a retaliatory action, the American consumer is going to see markedly higher retail prices. Even in the unlikely event that some manufacturing returns to the United States, retail prices are going to go up.