One of the nation’s biggest retailers told its suppliers Tuesday they’ll have to bear the cost of President Trump’s trade war with China alone from now on.
In a letter dated August 27, obtained by OPB, Target informed businesses that fill its shelves that they – not the mega-retailer – will have to absorb the increased cost of material imported from China.
In essence, the company said, the buck stops here.
"Target will not accept any new cost increases related to tariffs on goods imported from China," wrote Mark Tritton, executive vice president and chief merchandising officer for Target. "Our expectation is that you will develop the appropriate contingency plans so that we don't have to pass price increases along to our guests."
“Guests” in this context means the customers whose loyalty Target wants to maintain.
A spokesperson for Target confirmed Tritton’s letter, but would not say how many suppliers received it or if there are any exceptions. It’s unclear if this is a uniform policy.
The letter lays bare the tension and uncertainty the president’s trade war with China has created for the business community. Target wants to shield customers from price increases and remain a retailing powerhouse. It appears to be using its extraordinary buying power to try to preserve a world that is basically BLT – Before Latest Tariffs.
Meanwhile, suppliers that source materials from China are caught in a tit-for-tat tariff battle that is far more serious than the cliché implies.
On August 23, Beijing announced additional tariffs on $75 billion of U.S. exports. Hours later, President Trump tweeted he would boost tariffs on $550 billion in Chinese imports.
"Trump's actions will affect nearly everything Americans purchase from China," according to a recap from the Peterson Institute for International Economics.
David French, senior vice president of government relations for the National Retail Federation, said he hadn’t heard about Target’s memo to suppliers, but wasn’t surprised.
“Retailers are using every strategy they can to push those costs back on their suppliers wherever possible,” he said. “Frequently, those suppliers, however, are not in China. Those suppliers may be U.S. businesses that are manufacturing goods for the retailer from intermediate goods that are imported from China.”
That is surely the case for many companies that received Target’s notice Tuesday. Starting Wednesday, they’ll have to figure out what to do next.