China's warning to Walmart on tariffs shows Beijing is worried about local businesses

• China has warned Walmart against squeezing suppliers to offset US tariffs.
• US tariffs on Chinese goods have risen amid heightened tensions with the Trump administration.
• Companies were already shifting some manufacturing to other developing countries due to US-China tensions.

Beijing brought Walmart executives in for a meeting earlier this week — a sign the country is keeping a close watch on retailers amid concerns about US tariffs.

On Tuesday, Chinese authorities summoned the retail giant for a meeting, reported Yuyuan Tantian, a Weibo social media account linked to state television CCTV.

A spokesperson at China's Commerce Ministry said at a press briefing on Thursday that it had communicated with Walmart after reviewing reports and feedback from some enterprises, according to CCTV. Walmart has explained the situation, the ministry said without further elaboration.

Yuyan Tantian's post said the authorities, including the Ministry of Commerce, sought to discuss reports that Walmart had asked suppliers to cut wholesale prices to offset higher US tariffs.

The social media post said such a move would create risks of supply chain disruption and may "violate commercial contracts and disrupt the order of normal trading."

It also cautioned Walmart not to pass on costs from the tariffs to its Chinese suppliers.

"If Walmart insists on doing so, then what awaits Walmart is more than just a meeting," according to the post.

Beijing's meeting with Walmart underscores Chinese leaders' concerns about the economy, as US President Donald Trump's trade war injects fresh challenges.

"Beijing has essentially warned that it would take action against Walmart if Chinese suppliers are coerced to absorb the tariff impact," wrote Vishnu Varathan, Mizuho's head of macro research for Asia excluding Japan, in a Thursday note.

Beijing "is on its guard against US tariff assault on the margins of Chinese manufacturers," he added.

The development shows the tensions between US efforts to blunt inflationary effects from tariffs and Chinese efforts to ward off worsening deflationary risks, wrote Varathan.

On Wednesday, the US started imposing additional new tariffs on all steel and aluminum imports. On March 4, Trump's administration doubled blanket tariffs on Chinese goods to 20% on top of existing levies.

Walmart did not immediately respond to Business Insider's request for comment outside regular business hours. However, the company confirmed the meeting to Reuters and said it would continue to work closely with suppliers to "find the best way forward during these uncertain times."

China is the world's factory floor for companies worldwide, including Walmart. The retail giant's $5 billion worth of net sales in China account for about 3.5% of its total net sales globally.

Bessent: 'Prices won't go up'

Trump's new tariffs come as China is trying to revive confidence in its economy, which has been struggling to recover since pandemic lockdowns ended. It's dealing with multiple problems including a property crisis, high youth unemployment, and deflation.

In February, China's consumer inflation fell below zero for the first time in 13 months, highlighting weak demand.

China's industrial profits at large companies — a key indicator for how well factories, mines, and utility firms are doing — fell 3.3% in 2024, marking its third straight year of decline.

Last week, US Treasury Secretary Scott Bessent told Fox News he was positive Chinese suppliers would absorb the tariffs.

"With the China tariffs, I am highly confident that the Chinese manufacturers will eat the tariffs — prices won't go up," Bessent said.

Tensions between Washington and Beijing have been simmering for years, spurring companies — even Chinese ones — to move manufacturing outside China. The moves accelerated during the pandemic due to supply chains disruptions in China, which implemented on-off lockdowns of nearly three years.

Beneficiaries of the trend include India, Vietnam, and Mexico.