President Trump recently slapped some tariffs on various goods from China, and now Walmart, America's largest retailer as well as America's largest employer, is starting to grow concerned about the added cost. The chain relies on inexpensive goods from China, and those goods are about to get more expensive, and China is balking at absorbing the cost.
Walmart thought it could use its immense power as America’s biggest retailer to make Chinese suppliers eat the cost of President Donald Trump’s tariffs. But Walmart got a response it’s not accustomed to hearing: No.
Trump has slapped 20% tariffs — or taxes on imported goods — on all products coming from China. That’s put the squeeze on retailers like Walmart, which imports a lot of merchandise from China and sells those goods at the lowest price possible to American consumers. Walmart, in turn, has tried to pressure its Chinese suppliers to lower prices. But the Chinese government is having none of it.
The strong reaction from the Chinese government reveals how American companies are caught in the middle of an escalating trade war between the United States and China. While customers in the United States want low prices, that could be hard for Walmart to achieve if the Chinese government is stepping in, trade experts say. And if a company even as strong as Walmart struggles to hold down prices, it means that much smaller companies are going to be hurting, too.
On the national scale, China needs American consumers more than Americans need Chinese goods - but our industrial base is diminished, it won't be rebuilt tomorrow, and Americans have been perhaps too accustomed to cheap towels, clothes baskets, flatware and the like from China, via Walmart and similar chains.
It's an interesting problem for Walmart. Can China make this stick? Will Walmart eat the cost?
Walmart can either raise prices, risking a rebuke from US consumers that would impact its own bottom line, or press suppliers — risking the ire of the Chinese government. The Chinese backlash also contradicts US Treasury Secretary Scott Bessent’s prediction this month that Chinese manufacturers will “eat the tariffs” and prices for US consumers “won’t go up,” trade experts say.
“What this is signaling is that the Chinese government is saying, ‘We’re not going to pay for this tariff. US consumers are going to pay for it,” said Thomas Hoenig, a fellow at the Mercatus Center at George Mason University and former president of the Federal Reserve Bank of Kansas City.
There are longer-term solutions to this that are good for Walmart and America, but they'll take time.
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President Trump has already suggested heavy tax incentives for companies that onshore manufacturing. But while that's a desirable thing and a decent long-term solution, it won't help in the short term. In the short term, unless American retail giants like Walmart and Amazon can convince their suppliers to absorb at least some of the cost of the tariffs, then the American people are going to see some prices increase on Chinese-made consumer goods.
Every new policy has its ups and downs, and this is no exception. President Trump's tariffs will very likely raise some prices. We have, though, already seen that the president has a tendency to use tariffs as much as negotiating tools as revenue-generators, so some of the reciprocal tariffs may fall off as deals are made. Some won't, and there may well be some political cost - but if President Trump is going to do this, the time is now, early in his term, while he has the political capital to spend.
Meanwhile, talks between Walmart and its (Chinese) suppliers continue.
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