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Costco is pushing mainland China suppliers to cut prices in response to US tariffs, increasing the risk of scrutiny from Beijing as political tensions rises in the trade war, which is growing.
According to two suppliers, US warehouse retailers, which rely heavily on imports from China, have requested a price cut. Walmart and other top retailers have made similar demands, they and other exporters said.
“Big things, they have the muscles to do that,” one supplier said. “What would you do if you were us? You’re either screwed or screwed.”
President Trump’s administration charged a 10% extra charge on Chinese products in February 2024, then raised to 20% this month, putting pressure on US companies to minimize the impact on revenue.
Fallout is becoming increasingly sensitive in mainland China, where many suppliers overcome years of tariffs, operate on thin edges and prepare for more tax outlook.
Last week’s Walmart was summoned by China’s Commerce Ministry to discuss reports of retailer requests. Not only does it rely heavily on imports from China, the company has expanded on the mainland under the popular Sam’s Club membership model, and is present in over 100 cities.
Costco has opened seven warehouses on the mainland since 2019. “They should be very careful,” the supplier said in light of the Walmart meeting.
Costco declined to comment.
Walmart said it sources products from 70 countries around the world, “helping job creation, promotes supplier development and fuels the local economy.”
Yong Kian, a spokesman for China’s Ministry of Commerce, said at a press conference last week that Walmart’s debate was spurred by media reports and “feedback from companies,” and Walmart “explained the situation.” Those familiar with the conversation said it wasn’t “dress down.”
However, the response of state media reflects an environment increasingly framed by national boundaries. “China should not blame US tariffs,” said Yuyuantantian, who is affiliated with the state broadcaster CCTV in a social media post. In this post I used images of fingers pointing to a broken pot. This is the Chinese word for “scapegoat.”
China also shows a growing willingness to act against US companies responsible for local operations in response to US trade measures. PVH, owners of Calvin Klein and Tommy Hilfiger, were blacklisted earlier this year.
China’s import and export expert said there was “constant pressure to reduce product costs,” but there were doubts about whether demand was reasonable and there were concerns that it could lead to lower manufacturing standards.
In addition to demanding a price cut, large US retailers have sought to diversify away from China and business, particularly after Russia’s 2022 Ukrainian invasion in 2022 prompted fears of further deterioration in geopolitical ties and breakdowns in supply chains.
The discount retailer’s goal said the company will reduce production of its Chinese brands from around 60% in 2017 to 30% today, reaching 25% “four years before schedule” by the end of next year.
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“Half of what we sell is made in the US, but our scale, multi-category portfolio, and investments across our supply chain can help us navigate tariff pressures like we did before,” the company said.
In a quarterly report released last week, which ended February 16, Costco said tariffs “affect the costs of some of our products,” pointing to “government actions” related to China, Canada, Mexico and the United States.
“A rise in tariffs is more likely to have a negative impact rather than improve results,” the company said.
Additional Reports by Wang Xueqiao in Shanghai
