Source: Securities Times
A dramatic reversal of tariffs!
Since the so-called 'reciprocal tariffs' by USA President Trump, Global Retail Trade giants have exhibited a dramatic change in attitude.$Walmart (WMT.US)$Initially, they demanded that Chinese suppliers bear the heavy tariffs, but just 20 days later, under inventory pressure, they chose to absorb the tariffs themselves and resume purchases from China.
According to the South China Morning Post, some manufacturers in Jiangsu and Zhejiang provinces have received notifications from major American retailers like Walmart, urging them to resume shipments soon. Jiangsu and Zhejiang are provinces severely impacted by the US-China Trade War. It was reported that on Monday, a large exporter of stationery and office supplies in Ningbo received a notice from Walmart to resume normal shipments to the USA. The company stated that the costs of the new import tariffs will be borne by the American customers.
At the same time, foreign media reported that,$Home Depot (HD.US)$and $Target (TGT.US)$ They have also begun to urge suppliers in China to resume shipments and agreed to bear the tariffs. Furthermore, these American retailers made this decision after a meeting with Trump at the White House.
Emergency notification to resume shipments.
It is reported that under the tension in the supply chain and pressure on people's livelihoods, Walmart urgently notified Chinese suppliers on April 26 to resume shipments and promised to absorb all tariff costs themselves, showing a significant policy shift from strong pressure to compromise.
Walmart's CEO Doug McMillon warned that if supplies cannot be restored within two weeks, 59% of voters in swing states in the USA may turn against Trump due to soaring prices, impacting the election.
Walmart had issued a notice on March 11, 2025, requiring Chinese suppliers to bear the new tariffs themselves, or cooperation would be terminated.
However, as the so-called 'reciprocal tariffs' on Chinese goods further skyrocketed in the USA, Walmart faced unprecedented inventory pressure. The import volume of goods from China sharply declined, with a 33% reduction in cargo ships from China at the port of Los Angeles. Shortages of toys, outfits, and other commodities led to a 30% vacancy rate on supermarket shelves across the USA.
The Hong Kong Ming Pao quoted Chinese exporters at the Canton Fair stating that after discussions with Trump regarding tariff issues, retail giants like Walmart have notified Chinese suppliers to resume shipments of goods that were temporarily halted due to the tariff war that started earlier in the month. As for the key tariffs, the burden will be borne by American buyers. This also proves that Walmart's significant reversal on tariffs is not without reason.
Are there tariff discounts?
Trump met with major players in the Retail Trade on April 21 local time, including $Walmart (WMT.US)$ 、 $Home Depot (HD.US)$ , Lowes and $Target (TGT.US)$ The discussion on comprehensive tariffs may raise the issue of increased costs for these companies in importing daily necessities. According to company data, more than half of the imported commodities for Walmart and Target come from China.
A Walmart spokesperson stated: "We had a productive meeting with President Trump and his team, and we appreciate the opportunity to share our views." The statement did not elaborate on the details. Home Depot's spokesperson described the meeting as "informative and constructive."
Outside speculation suggests that the White House may have offered tariff exemptions on essential living goods, but the details remain undisclosed, indicating a fierce political and economic game. The tariff policy has also exposed the fragility of the USA supply chain.
Despite Trump's push for manufacturing to return, USA domestic capacity cannot rapidly fill the gaps. For example, a toy factory in New Jersey tried to replace the Chinese supply chain with 3D printing technology, but due to insufficient technological maturity, the first batch had a pass rate of only 37%.
Additionally, while Vietnam and India are actively taking on USA orders, their quality and capacity remain limited. The quality inspection pass rate in Vietnamese factories has dropped by 8%, and Indian capacity can only meet 15% of Walmart's seasonal product demand. Furthermore, strict scrutiny by USA customs on transshipment trade has led to 37% of commodities made in China being seized, worsening supply chain issues.
According to data from the National Retail Federation, the Consumer Price Index (CPI) is expected to increase by 9.8% year-on-year by April 2025, with tariff costs accounting for 43%, indicating that tariffs have become an "invisible regressive tax" harming the purchasing power of low-income families.
Behind-the-scenes deals in the White House: companies forced to compromise.
According to analysis, if the tariffs are passed on to consumers or suppliers, Walmart's gross margin in the North American market would plummet from 24.7% to 9.3%, resulting in a loss of $19 billion in profit within a year. Thus, even if absorbing the tariffs increases operational pressure, Walmart has no choice. Even a slight adjustment in retail prices by Walmart still makes it difficult for the company to survive due to tariff costs. For example, a string of Chinese-made LED lights originally priced at $9.9 has an after-tax cost of $26.3, with the final retail price raised to $28.5.
Analysis suggests that, compared to large retailers, small and medium-sized enterprises are more heavily impacted in this tariff war. Taking USA jewelry importers as an example, they face luxury watch tariffs as high as 31% and bulk diamond tariffs of 30%, severely squeezing profit margins and increasing operational risks. Although the USA is actively seeking to diversify its supply chain, such as turning to Mexico and Southeast Asia, it remains difficult to completely eliminate reliance on China manufacturing in the short term.
Editor/Rocky
