- Chinese officials met with Walmart to discuss the pressure the retailer was exerting on suppliers to lower their prices to offset cost increases from tariffs. Walmart has the leverage with suppliers to get them to lower prices, but even that can only go so far. If Walmart succeeds in keeping prices lower than its competitors, it could come out ahead, even if consumers become highly price-conscious.
Officials from China’s Ministry of Commerce met with Walmart executives Tuesday to discuss reports the retailer had pressured Chinese suppliers to lower their prices after Trump's tariffs on China kicked in.
First reported in Chinese state media, the talks between the Ministry of Commerce and Walmart came as U.S. companies attempt to navigate recently imposed tariffs. Walmart is reportedly requesting suppliers bear the brunt of cost increases caused by tariffs. But that proposition appears unpalatable to Beijing. Chinese officials appear to be loath to accept a scenario in which their own suppliers are forced to cut prices because of tariffs imposed by the U.S.
“Chinese suppliers and the government will not take tariffs lightly, as we’ve witnessed the past few days,” said Keith Hartley, CEO of supply-chain software startup LevaData, told Fortune in an email.
The tariffs come at a time when trade relations between the U.S. and China are particularly tense. Last month, President Trump announced sweeping 20% tariffs on Chinese imports, and on Wednesday, Trump imposed 25% tariffs on all steel and aluminum imports from China. While the ties between China and the U.S. might be fraying, Chinese consumers love the mega retailer, with its business abroad soaring.
To mitigate rising costs from its Chinese suppliers, Walmart will use its size as America's largest retailer to apply leverage during price talks, according to Noah Rohr, an equity analyst at Morningstar who covers Walmart.
“Walmart is in an enviable position; they do have the ability to negotiate with suppliers in a pretty tough fashion,” Rohr told Fortune. "Their scale gives them bargaining power when dealing with suppliers.”
Chinese officials sought a meeting with Walmart leaders after Bloomberg reported last week the company had told suppliers to cut their prices by as much as 10% per round of tariffs. Walmart, which sells virtually every type of product, still has a large number of Chinese suppliers. About 80% of Walmart’s suppliers are in China, according to the Alliance for American Manufacturing. They supply the company with everything from clothes to household appliances to some food items. But even a company as strong and well-positioned as Walmart will find it nearly impossible to avoid passing along some price increases to consumers. Walmart will still likely try to keep its trademark low prices, though.
“Even if they are able to get pretty favorable terms, it's just tough to offset the price increases in its entirety,” Rohr said.
Walmart will negotiate with each supplier on an individual level, according to Bloomberg. But most suppliers working with Walmart can’t afford to cut their costs that much because the retailer already expects low prices from suppliers so products can remain highly affordable for consumers. For some Chinese suppliers, even a 2% price cut would mean they’d have to sell their products at a loss, per Bloomberg.
A spokesperson for Walmart said the company's purpose was to help consumers save money and that it would work with suppliers to achieve that goal. "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," the spokesperson said in an email. :We have a strong business in China and are proud of our associates around the world who are delivering for customers and members."
Walmart management acknowledged tariffs would impact prices and consumer confidence, but the company was prepared to handle them.
"Tariffs are something we've managed for many years, and we'll just continue to manage that,” Walmart CEO Doug McMillon said during the company’s latest earnings call in February. "We've got a great team. We know how to do that. We can't predict what will happen in the future, but we can manage it really well.”
For Walmart, it appears the priority is raising prices as little as possible for consumers, even at the cost of chipping away at its gross margin so its products remain cheaper than competitors, Rohr said. Keeping prices lower than other retailers has contributed to Walmart’s strength over the years. The company’s stock is up 40% during the last 12 months, and it has regularly lured shoppers away from other retailers with a promise of low prices. But on its most recent earnings call, Walmart executives lowered the company’s 2025 outlook, citing the raft of macroeconomic uncertainty, including tariffs.
“In the case of Walmart, one could make the argument that the tariffs, to some degree, might actually help them,” Rohr said. “If consumers are looking for value and being more conscientious of the prices they're paying, then that could drive more consumers to Walmart which generally has the lowest prices in the retail industry.”
Much of that strategy, however, would hinge on whether suppliers play ball and agree to lower their prices. Ordinarily, Walmart would be able to exert leverage on its Chinese suppliers to get them to lower prices, at least temporarily. But the Chinese government stepping in risks throwing a wrench in Walmart’s plans.
Update, March 12, 2025: This article has been updated to comment from Walmart.
