Target is joining retail giants Costco and Walmart in pushing its Chinese suppliers to absorb some of the rising costs of U.S. tariffs. With tariffs on Chinese goods set to increase on April 2, major U.S. retailers are proactively seeking ways to mitigate the impact of these tariffs on their supply chains.
Target’s Strategy to Offset Tariff Costs
Amid the current 20% tariff on Chinese imports—affecting approximately $430 billion worth of goods—Target is reportedly asking its Chinese suppliers to shoulder part of the cost. For instance, a supplier of hairpins and claw clips revealed that Target requested the supplier “pick up half the costs of the tariffs.” After protracted negotiations, the supplier experienced order delays and ultimately lost the business. Although Target has not commented publicly, this move reflects a broader industry trend among retailers aiming to protect their profit margins.
Reducing Reliance on Chinese Imports
While Target does not operate any physical stores in mainland China, it has been actively working to reduce its dependency on Chinese goods. The retailer has successfully cut the share of its products sourced from China from 60% to 30%. In contrast, Costco operates just seven warehouses in China, while Walmart boasts more than 330 locations, albeit facing criticism from Chinese authorities over its strategies.
Tariff Impact and Price Increases
Despite efforts to minimize the effects of tariffs, Target CEO Brian Cornell has indicated that consumers can expect price increases, especially on fresh produce such as bananas, avocados, and strawberries. The company is engaging in extensive scenario planning to manage tariff impacts and avoid drastic price hikes for its customers.
Additional Challenges Facing Target
Target is not only grappling with tariff pressures but also other significant challenges. Recently, the retailer reduced its corporate employee bonuses, citing weaker consumer spending and inflationary pressures. This decision followed a cautious March earnings report that highlighted “ongoing consumer uncertainty” and concerns over the effects of tariffs.
Moreover, a reduction in Target’s Diversity, Equity, and Inclusion (DEI) initiatives has led to a decline in foot traffic. The move has triggered a 40-day boycott and resulted in lawsuits from shareholders and the state of Florida, further straining Target’s efforts to maintain its market momentum.
