China’s Ministry of Commerce recently met, according to news reports, with Walmart execs over allegations from suppliers that the retail giant is pressuring them to lower prices to offset a broad 20% tariff recently imposed by the Trump Administration.
Walmart is reported to have asked suppliers of kitchenware and clothing to lower prices by 10% for each round of tariffs imposed which Chinese authorities say is “unreasonable.”
The meeting was held March 11, and Walmart was reportedly warned not to shift the cost of U.S. tariffs to Chinese suppliers. Ministry officials noted that the demand to “significantly reduce prices” is “unilateral.” They said Walmart’s move to strong-arm suppliers “may violate commercial contracts,” and if the retailer insists, China’s next step is beyond talks.
In a statement provided to Talk Business & Politics, Walmart did not directly respond to the allegation of pressuring suppliers.
“Walmart’s purpose is to help people save money and live better. Our conversations with suppliers are all aimed at making our purpose a reality for millions of customers, and we will continue to work closely with them to find the best way forward during these uncertain times. We have a strong business in China and are proud of our associates around the world who are delivering for customers and members,” noted the statement provided by Rachael Simmons, Walmart corporate spokeswoman.
The first 10% tariff was imposed by the Trump Administration on Feb 4, with an extra 10% taking effect on March 4. Chinese officials also warned that Walmart’s move is a risk to the supply chain and could harm the interests of Chinese and American companies.
Walmart is widely known to work with its suppliers in all countries to get the best price possible so that the low cost can be passed on to customers. Given Walmart’s massive scale, suppliers often make less profit because they can make up the difference in volume.
Bloomberg reports that most suppliers in China are already grappling with “razor-thin” profit margins and there is no room for more cuts.