Walmart and Target resume business with Chinese factories

Walmart and Target resume business with Chinese factories

Walmart and Target have resumed business with some of their Chinese suppliers after suspending orders for several weeks amid uncertainty over the imposition of high U.S. tariffs, two Chinese factories told CNN.

Key event in the trade relationship

The resumption of orders came just days after a meeting between US President Donald Trump and representatives of retail giants Walmart, Target, Lowe's and Home Depot. These had the president warned, that shelves in stores across America could soon be empty.

Ensuring sustainability of supply chains

The partial resumption of business suggests that retailers are trying to replenish their inventories. High tariffs could disrupt their supply chains, which are crucial to traders' profit margins and the survival of many factories in China.

The 145% high tariffs on Chinese goods have forced many American retailers, both large and small, to suspend or suspend previous agreements with their Chinese suppliers to cancel completely. The two factories that spoke to CNN supplied Walmart and Target, and reported that previous orders had been pending for weeks.

A trade war with no way out

The United States and China, the world's two largest economies, remain locked in a trade war with no clear resolution. Both sides refuse to back down from high tariffs imposed and there are no signs of imminent trade talks.

Vivi Tong, whose factory in China's central Anhui province produces toy cars, told CNN that orders from Walmart resumed last week after Trump suggested tariffs might fall. "American supermarkets are running out of inventory, and we are also waiting to see how the situation develops. Our toys are low-value-added products - if tariffs go down to around 30%, it will be easier for our customers to accept this," she said.

Important season for toy production

Tong mentioned that her customers would usually place preliminary orders this time of year. The period from May to October is typically the peak season for toy production and shipping, leading up to the year-end holiday season.

The Hong Kong newspaper Ming Pao reported on Saturday, Walmart has placed new orders with some Chinese exporters after two ceramics suppliers attended a key trade fair in the city of Guangzhou. One of them told the newspaper that orders had only “partially resumed.”

Progress in the trade relationship?

Michael Hart, president of the American Chamber of Commerce in China, declined to comment specifically on Walmart but said a resumption of deliveries was not surprising. “This fits with the trend we are hearing here in China, where companies are negotiating with the government for certain items and products that target the Customs exemption list “particularly when these products are considered critical to the country or cannot be provided by other suppliers,” he explained.

Tong reports that her customers are still very cautious and that she has barely shipped anything to the US this month. Nevertheless, American retailers asked for discounts, which she accepted. “This year, many of our customers are asking for price reductions - there's really nothing we can do about that,” she added.

Jochen fight for their survival

Allen Yan, who runs factories in the eastern province of Zhejiang that make swimming pool products, received notice Monday to ship a batch of products for Target after those shipments were suspended for two weeks. Business with other customers, such as Costco and Sam’s Club, has not yet resumed. “In two months, shelves in the U.S. will probably be empty,” Yan said, adding that he has turned down discounts.

One published on Monday editorial Chinese state media Global Times called on Washington to “carefully” reflect on the news about Walmart as it shows that “ill-advised tariff policies pose a severe test to companies’ pricing and supply chains.”

Consequences for jobs

Although official Chinese media are emphatic, it's not just American retailers and consumers who could be affected. China's export industry accounts for about 18 million jobs, according to the Ministry of Commerce has carried out, and the decades-long, interconnected business relationship between the US and China leaves both sides vulnerable.

Rachel Zhang, whose textile factory sells blankets and pillows to several retailers including Walmart, Costco and Target, told CNN that orders were paused in early April. Zhang explained that she can only count on small orders from European countries and Japan, so she is trying to sell her products in the domestic market for now. However, the uncertainties pose a major challenge to their prospects.

"The key question is: How many months into the future are we talking? Six months? Nine months? Companies just can't wait that long," she said. “In the end, it is the small and medium-sized businesses... that will pay the price,” she added.

The government in Beijing tried one press conference to appear optimistic on Monday. Sheng Qiuping, deputy minister of commerce, said Beijing would strengthen financial and policy support for the country's export economy in the face of US tariffs. The government will also “actively help exporters respond to external risks and challenges” and support them by promoting their transition to domestic markets and diversification into other markets.

China will "continuously expand the toolbox of policy measures to stabilize foreign trade and introduce new measures as needed," he said.