Walmart (WMT) recently raised eyebrows by making a bold move to dodge the potential negative impacts of tariffs.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers in the form of price increases.
On March 4, President Donald Trump increased his previous 10% tariff on all goods imported from China to 20% and imposed 25% tariffs on all goods imported from Mexico and Canada.
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Shortly after these tariffs went into full effect, Walmart began asking some of its suppliers in China, including those who produce clothing and kitchenware, to cut their prices by up to 10% per round of tariffs, according to a recent report from Bloomberg.
Walmart’s request would shift the burden of tariffs onto those suppliers.
The retail giant is allegedly negotiating with each manufacturer, and the price cuts vary per firm.
Walmart receives harsh response from China
In response to Walmart’s request, China TV broadcaster CCTV took to its official social media account, Yuyuantantian, to make a post claiming that the retail giant’s request is “unreasonable.”
A customer walks through an aisle at a Walmart store in Grand Prairie, Texas, US, on Thursday, April 25, 2024.
“Walmart’s demand for Chinese suppliers to bear the full tariff burden is unreasonable and disrupts fair competition and international trade order,” reads the post.
Chinese manufacturers also took to social media to claim that Chinese companies “have no room to lower prices in response to US tariffs.”
Some Chinese citizens even rebuked Walmart’s request to land price cuts on goods, with some pressing the Chinese government to “take action.”
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Chinese officials have since confirmed that they had recently met with Walmart executives to discuss the situation.
“Our relevant departments have reached out to Walmart to further understand the situation, and the company has provided an explanation,” said He Yongqian, a spokesperson for the Commerce Ministry, during a press briefing on March 13.
Walmart previously shared its plans to keep prices low amid tariffs
Walmart Chief Financial Officer John Rainey warned in an interview with CNBC in November that Walmart might have to raise its prices due to Trump’s plan to enforce tariffs.
This potential move from Walmart threatens to drive away its low-income customers who are already battling inflation and higher costs of living.
“We never want to raise prices,” said Rainey in the interview. “Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.”
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He also said that the company already has a plan in place to keep prices low for customers.
“Tariffs, though, are inflationary for customers, so we want to work with suppliers and with our own private brand assortment to try to bring down prices,” said Rainey.
In 2023, it was estimated that 60% of Walmart’s merchandise was imported from China that year. The company has been aiming to lower its reliance on China to import goods. Walmart products are also sourced in America, Mexico, Vietnam, India, Cambodia and the Dominican Republic.
During an earnings call on Feb. 20, Walmart said that it has a great team that is equipped to handle tariffs.
“We feel good about our ability to navigate the environment, whether it’s tariffs or other macro uncertainty,” said Rainey during the call.
Amid the looming threat of tariffs, Walmart revealed in its latest earnings report that it expects its net sales to only increase by 3% to 4% and its operating income to rise by 3.5% to 5.5% for the year, falling short of investor expectations.
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