Walmart under pressure in China: demand for discounts because of Trump's tariffs

Walmart under pressure in China: demand for discounts because of Trump's tariffs

Walmart is in the middle of an intensifying trade war between the United States and China. Chinese authorities on Tuesday summoned executives from the U.S. retail giant to investigate whether Walmart pressured its suppliers in China to offer discounts to cope with rising tariffs imposed by Donald Trump.

Rising Tariffs and Impact on Walmart

Trump has doubled tariffs on all Chinese imports to 20% since last week. In response, China has announced a new round of retaliatory tariffs targeting U.S. agricultural imports, in effect since Monday.

Price increases are coming

Many retailers are struggling to deal with Trump's chaotic tariff announcements, which are ratcheting up trade tensions between the world's two largest economies. Retailer report told CNN that they may have to raise prices even though many customers are already feeling financial pressure and the effects of inflation.

Walmart's efforts at discounting

Reported last week Bloomberg, Walmart has asked some of its Chinese suppliers for significant discounts of up to 10% to offset the impact of US tariffs.

Reactions of the Chinese authorities

According to a report from Yuyuantantian, the official social media account of state broadcaster CCTV, Commerce Ministry officials have requested a meeting with Walmart to "understand the situation." The post said: "If this is true, Walmart's requirement for Chinese suppliers to bear the full burden of tariffs is unreasonable and disruptive to fair competition and the international trade order."

Possible consequences for Walmart

In a warning, the post added that Chinese authorities could take "further action" if the American retailer continues to insist on its discounts. Although it is not uncommon in China to ask suppliers for discounts, this is currently a difficult matter as many already operate on very thin profit margins.

Walmart's statement

In a statement to CNN, Walmart emphasized that it is about helping people "save money and live better." The company further stated: "Our discussions with suppliers are aimed at achieving our goal for millions of customers and we will continue to work closely with them to determine the best course of action during these uncertain times."

Walmart in China

In addition to sourcing products from China, the Arkansas-based retailer is actively and successfully operating in the Chinese market, having entered China in 1996 and opening its first superstore and a Sam's Club in the southern megacity of Shenzhen. Walmart has a presence in more than 100 Chinese cities and saw net sales in the country increase by over the last fiscal year 16% to $17 billion compared to the previous year.