Walmart shows key signal of trade war uncertainty

by Bloomberg News

Christmas, and a lot else, will be more expensive this year for American consumers as Donald Trump’s trade wars upend global supply chains.

At a factory in China’s Zhejiang province that churns out Christmas ornaments for Walmart Inc., it’s always been standard practice to add price stickers to packages as the last step before the goods are shipped off to the US. 

But for the first time in more than 10 years, Walmart has asked the factory to leave price stickers off the items, according to Barry Shan, the Ningbo city-based supplier’s vice president, reflecting the deep uncertainty caused by Trump’s tariffs.

Elsewhere, US retailers are suspending orders and halting shipments as the global supply chain grinds to a near-halt. Trump has announced a 90-day pause before tariffs take effect so that countries can negotiate deals. But with levies escalating on Chinese exports to 125% and Beijing retaliating to every US move, businesses have little idea what strategy to take. 

Kohl’s Corp. had negotiated prices and placed orders for clothing accessories with one Chinese supplier last week, but has now asked for production to be suspended though raw materials have already been prepped, said company owner Alice Lu. 

While factories negotiated with their American clients to share the costs of earlier rounds of tariff increases, the latest developments have created a sense of powerlessness on either side, suppliers say. 

“There’s no longer a commercial decision that can fix it,” said Zheng Tao, a Shanghai-based exporter of car parts. “We’ll just have to see how the politicians handle this.”

His worries reflect how skyrocketing tariffs have thrown businesses on both sides of the Pacific Ocean into disarray. With Trump’s reciprocal tariffs now in effect, import duties for China were at 54% and are set to rise further to 125% after multiple rounds of retaliation between the US president and Beijing.

One thing is clear: the highest US levies in more than 100 years will all but guarantee goods shortages and higher prices for American shoppers.

 Walmart declined to comment and Kohl’s did not respond to a request for comment. At an analyst day on Wednesday, Walmart Chief Executive Doug McMillon said that there are “real-time decisions” being made on prices, and the company has not canceled orders due to tariffs.

The situation has left some Chinese exporters in a helpless position, waiting for decisions from their clients as they can’t afford to bear any more costs from the tariffs. Adding to the trade paralysis is uncertainty among suppliers over whether to move manufacturing out of the country, especially to Southeast Asia, with Trump’s sweeping duties affecting many other US trading partners almost as badly. 

The Kohl’s supplier got in touch with a Cambodian factory after the initial 20% additional tariffs on China. She was ready to send a batch of yarn to Cambodia earlier this week but called off the shipment after Trump’s 49% duty on the Southeast Asian country.

“Now, you know every country, especially those production hubs, could be a US target for rising tariffs, we feel helpless,” said Frank Deng, a sales manager of a Shanghai-based home appliance exporter which sells to the US online. “We’re not sure what we can do next.”

That sense of resignation was on display when Cameron Johnson, senior partner at Shanghai-based consultancy Tidalwave Solutions, paid a recent visit to the trade hub of Yiwu City.

“Suppliers here look at this and say, we do not believe these tariffs will be here in the five-to-10-year window that we need to actually build out in the US,” he said. “And in the meantime, we don’t believe that our customer is gonna be paying those prices.”

Copyright Bloomberg News