It Cost to Be the Boss; Costco (NASDAQ: COST), pushes for price cuts from Chinese suppliers

Costco (NASDAQ: COST), the US warehouse retailer, is urging its suppliers in mainland China to lower prices in response to US tariffs, according to a report in the Financial Times. This move increases the likelihood of attracting attention from Beijing as the trade war escalates. Walmart (NYSE: WMT) and a few other leading retailers have also made similar requests, according to statements from suppliers and exporters.

The Trump administration imposed an extra 10% tariff on Chinese goods in February 2024, which was later increased to 20% this month. This has led US companies, including Costco, which heavily relies on imports from China, to find ways to lessen the effects on their profits.

The situation is becoming increasingly sensitive in mainland China where many suppliers, already dealing with years of tariffs and operating on slim profit margins, are preparing for the possibility of more levies.

Walmart was called in by China’s Ministry of Commerce last week to discuss the retailer’s requests. The company, which also relies heavily on Chinese imports, has expanded in mainland China under its popular Sam’s Club membership model, with a presence in over 100 cities.

Since 2019, Costco has opened seven warehouses in mainland China. However, one supplier noted that the company would tread carefully, given the recent meeting between Walmart and China’s Ministry of Commerce.

Meanwhile, Walmart stated that it sources products from 70 countries worldwide, contributing to job creation, supplier development, and local economies.

He Yongqian, a spokesperson for China’s Ministry of Commerce, confirmed last week that the meeting with Walmart was prompted by media reports and feedback from companies. He noted that Walmart had clarified the situation, and that the discussion was not a reprimand.

China’s state media has been framing the situation along national lines, arguing that China should not be blamed for US tariffs.