by Zhao Xiaojuan

Some Chinese manufacturers are seeing their profits plunge as major US retailers including Walmart and Costco push for price cuts to offset rising tariffs on Chinese goods, raising concerns over supply chain sustainability and product quality.

A Guangdong-based food packaging company told Jiemian News that its profits have dropped more than 40% year-on-year due to falling order volumes linked to escalating tariffs on Chinese exports to the US. The firm, which relies on overseas clients for 80% of its business, said it has been asked by its trading partners—who supply to Walmart US—to lower prices in response to the latest round of tariffs.

“Orders were already being cut before Trump took office,” the company’s manager said. “Now we’re passively reacting—trying to find alternative customers in the domestic market is all we can do.”

Starting March 4, the US imposed an additional 10% tariff on certain Chinese imports, pushing the cumulative rate to 20%. In response, some American retailers have demanded that Chinese suppliers absorb the added cost—especially in categories such as kitchenware and apparel—with requested price cuts of up to 10% per tariff round.

The Chinese Ministry of Commerce has held discussions with Walmart over its reported pricing demands, though the company has not publicly commented. Repeated media inquiries to Walmart and Costco have gone unanswered.

A kitchenware manufacturer in Guangdong told Southern Metropolis Daily that since the tariff hike was announced, some US clients have postponed orders or stopped placing them altogether.

In a statement on March 12, the China Chamber of Commerce for Import and Export of Textiles urged US retailers to address trade tensions fairly, noting that it had received complaints from members about demands for price cuts.

While Walmart and Costco benefit from scale and global sourcing—Walmart alone posted US$681 billion in revenue and an 8.6% rise in operating income in fiscal year 2025—the cost-cutting pressure is felt most acutely by smaller Chinese suppliers with thin margins. Analysts warn that such unilateral price demands risk breaching commercial contracts and could lead to supply chain disruptions.

Walmart’s gross margin has remained relatively stable at 23–25% over the past five years, slightly below Target’s 25–30%. Costco, which operates on a membership model, reported a consistent gross margin of around 12.4% between 2021 and 2025.

These retailers have long relied on a strategy of low prices backed by global sourcing, with China playing a central role. While a weaker yuan has partly cushioned the impact of tariffs for US importers, many Chinese manufacturers lack the flexibility or bargaining power to absorb sudden cost shifts.

Some exporters have already begun diversifying to mitigate future tariff risks. Pet product maker Yiyi Hygine, which derives over half its revenue from overseas markets, has expanded its client base to include Costco and launched a new manufacturing facility in Cambodia this year.

In a March 14 investor update, Yiyi said it was in active talks with customers and suppliers about how to manage rising costs and would continue building out its Cambodian operations.

Robotic vacuum maker Roborock also began shipping products from its Vietnamese contract manufacturer to the US in late 2024 to reduce tariff exposure, according to a company statement in January.

As trade frictions persist, more Chinese exporters are reassessing their dependence on the US market and reconfiguring global operations to stay competitive.