Costco Demands Price Cuts from Chinese Suppliers

According to a March 18 report by the UK's Financial Times, Costco has requested Chinese suppliers to reduce product prices in an attempt to shift 20% of tariff costs, following similar moves by Walmart, Home Depot, Target and other retailers. This series of events not only impacts Sino-US corporate partnerships but may also trigger ripple effects on the development of foreign retailers like Costco in the Chinese market.

The report indicates that about one-third of Costco US sales come from imported products, with less than half originating from China, Mexico, and Canada. This practice isn't unique to Costco - Walmart previously attempted similar supplier price reduction strategies. China's Ministry of Commerce has summoned Walmart for discussions, while the China Chamber of Commerce for Import and Export of Textiles stated it would take measures to protect member interests if allegations are confirmed.

Home Depot, the largest US home improvement retailer, has also pressured suppliers to either lower prices or relocate production lines. Target is negotiating with suppliers to share additional costs while planning partial price increases.

Since February, the Trump administration's tariff increases on Chinese imports from 10% to 20% have significantly raised costs for US importers, prompting major retailers to transfer tariff burdens to suppliers. However, this demand faces strong resistance from Chinese suppliers already grappling with rising material costs and thin profit margins. Many suppliers refuse to shoulder all tariff pressures, with smaller suppliers particularly vulnerable to being squeezed out.

Gao Chengfei, Director of Guangzhou Tiaoyuan Marketing Consulting, criticized this approach from business ethics and supply chain perspectives: "This unilateral cost-shifting violates fair cooperation principles. Supplier-retailer relationships should be mutually beneficial rather than zero-sum. Such practices could destabilize supply chains, as forced price cuts may compromise product quality and supply reliability. Moreover, it risks escalating trade frictions and damaging Sino-US business relations."

Notably, Costco opened its first Chinese mainland store in 2019 but has maintained cautious expansion. Currently operating 7 stores across Shanghai, Suzhou, Ningbo, Hangzhou, Shenzhen, and Nanjing, the company only began disclosing China performance data in 2022. While total China revenue grew from 3 billion yuan in 2022 (15 billion/store, 4 million/day) to 5.5 billion yuan in 2023, average per-store sales dropped to 1.1 billion yuan (3 million/day) amid three new store openings. With only two new stores planned for 2024, concerns emerge about Costco's slowing growth and expansion pace in China.