American retailers are demanding that their Chinese suppliers shoulder half to 66% of the U.S. import duties, as the ongoing US-China trade war ramps up pressure on businesses’ bottom lines. U.S. retailers have been locked in talks with Chinese producers for weeks over how to handle the additional costs caused by the trade war, with the firms facing intense political pressure at home to “eat the tariffs” and keep prices stable. Walmart and other major U.S. retail groups previously agreed to bear the full cost of the tariffs when they asked their Chinese suppliers to resume shipments in late April, industry sources told the South China Morning Post. But global brands are now pushing suppliers in both China and parts of Southeast Asia to absorb a large chunk of the tariffs, according to suppliers to Walmart, Target, Nike, Puma and Adidas. “Most of our customers, the garment vendors exporting to major retailers and brands, are being asked to cover 50% to 66% of the current tariffs,” said an executive at a fashion supplier, which produces and sources from China and Southeast Asia and then sells across the United States and Europe.
The negotiations remain fluid and the details of how the tariff costs would be divided have not been finalized, the sources stressed, as both sides remain in constant contact as they try to navigate a “tough time” for the industry. But some Chinese suppliers said they would struggle to bear the additional costs being demanded of them – especially if the current 90-day truce in the U.S.-China trade war expires without Beijing and Washington reaching a deal. In mid-May, Beijing and Washington agreed to drastically scale back tariffs on each other’s products for 90 days, with the U.S. reducing its additional duties on Chinese goods from 145% to 30% and China slashing its levies on U.S. products from 125% to 10%. But the tariffs could skyrocket back to three-digit levels in August unless the two sides make a deal. U.S. Treasury Secretary Scott Bessent admitted that talks between Beijing and Washington were currently “a bit stalled”.
A source with a stationery maker in Zhejiang province said the company had been in discussions with Walmart and other U.S. retailers over “a backup plan” for what may happen after the tariff truce ends in August. Walmart agreed to cover the full cost of any tariffs until August in its previous deals with the stationery maker, but the U.S. retailer has yet to place any orders beyond August. According to the source, the Zhejiang manufacturer is capable of footing about 30% of the additional costs from the tariffs, but there is “no room” to go up to 50% or higher. The company has yet to reach an agreement with Walmart. A spokesperson for Walmart said: “We have always worked to keep our prices as low as possible. We’ll keep prices as low as we can for as long as we can given the reality of small retail margins.” Bessent said that there was “likely” a need for U.S. President Donald Trump and President Xi Jinping to intervene to get a deal over the finishing line before August 12, the South China Morning Post reports.
In China, there has been a focus on mitigating the impact of the trade war by helping exporters pivot to the domestic market. But that is often not possible for Chinese factories that make products on a contract basis for foreign brands, according to a report by Christopher Beddor, Deputy China Researcher at analysis firm Gavekal. “One executive at a large online retailer notes that there is less domestic demand for oven gloves – as fewer housing units in China have ovens – and no buyers for some products such as bulk Christmas cards.”
