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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.