US biting the hand that feeds its consumers value-for-money goods

Walmart has asked some Chinese suppliers for price cuts of up to 10 percent per round of additional tariffs the Donald Trump administration imposes on Chinese goods.

The US retail giant is doing nothing but trying to shift the burden of the United States' arbitrary tariffs onto Chinese suppliers. So the strong pushback from the latter is fully understandable. They are not only in the position of shouldering the full cost of the US' irrational duties, but also have no space to further reduce their prices.

Most Chinese suppliers' margins are already "razor-thin" due to Walmart's strategy of procuring goods cheaply in order to maintain its competitive advantage. As reported, for some Chinese suppliers, any price reduction greater than 2 percent would see them make a loss. No wonder those Chinese suppliers that have had their own upstream vendors directly refuse any requests to cut prices by more than 3 percent.

So if other US retailers, as reported, follow suit, the Chinese suppliers, if they still want to keep their US contracts, will have to lower their requirements for their products' quality, as they will have to consider purchasing some parts from other developing countries where the quality of the parts is generally lower than that of their Chinese counterparts. A move that has raised concerns that the lower prices will come at the expense of product quality. Then US consumers will have to accept the goods they buy at the same price are of a lower quality than before. They need to be reminded that it is the US' punitive tariffs that will have "eaten" into the quality of their purchases.

After decades of cooperation, the US retailers are well aware the cost performance of their Chinese suppliers is the best they can get. That means it will be very difficult for them to find alternatives to their Chinese suppliers, whose competitive advantage is actually based on the huge manufacturing base of China and the high efficiency and stability of the country's industry and supply chains.

In the face of the negotiations the US retailers are carrying out with them, the Chinese suppliers should have a clear mind that every percentage point of price cut they agree to will mean a loss of their own net profit. More importantly, once they start making that concession, they will be putting themselves in an awkward position of continuously being fleeced by the US retailers in the future as the Trump administration sees its art for a deal works well with the Chinese, until they find they cannot make ends meet in the near future. And if they choose to lower their quality to maintain their own profit, their brand image and credit that they have spent a long time promoting and developing among US consumers will suffer an irremediable loss.

So it is high time relevant industry, business and commerce associations played their due role to coordinate the Chinese enterprises' actions in the process forming a united front in the negotiations to improve their collective bargaining power and better protect their interest.

IFENG.COM