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BusinessNews

Target tells suppliers to eat higher tariff-related costs

Retail giant Target Corp. (NYSE:TGT) has sent a blunt message to its suppliers – don’t think of passing on higher tariff-related costs to us.

In a letter to suppliers, the company said that it will “not accept any new cost increases related to tariffs on goods imported from China.” Mark Tritton, Target’s executive vice president and chief merchandising officer, said the company expects suppliers to “develop the appropriate contingency plans” so that it doesn’t have to pass on price increases to its customers.

Tritton told the suppliers that Target has so far minimized the impact of higher tariffs with “your cooperation, hard work and partnership” and that it appreciates “the work we’ve done together.” 

The existence of Tritton’s letter, which was dated August 27, was first reported by Oregon Public Broadcasting earlier this week.

The letter’s disclosure comes just days after the effective date of a tariff increase to 15 percent from 10 percent on a percentage of $300 billion in Chinese imports. The increases on the remaining amount go into effect Dec. 15.

On October 1, tariffs on an additional $250 billion of imports are to rise to 30 percent from 25 percent. The U.S. and China announced yesterday that the two sides plan to hold high-level talks early next month in Washington.

With the holiday buying season less than three months away, U.S.-based retailers are concerned about the tariffs’ impact on consumer behavior. Large retailers that traditionally hold enormous leverage over their suppliers are expected to take a hard line on cost increases, and may not hesitate to switch vendors if others are creative or stoic enough to absorb the tariff hikes without crunching their margins.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

5 Comments

  1. Well that’s callous and ballsey from the Target EVP. Why should suppliers eat the tariff cost alone? Target should at least share the cost since Target has enjoyed the past profits from low cost Chinese goods. Typical giant corporation dropping the hammer. While they are at it, it’s time for Target to hammer freight rates down too.

    Blah!

  2. So….its like this….YOU supplier take the hit in profit margin [if margin room is available]….my response KMA…!!!

  3. Hmm. Did Target not know that their suppliers have been importing from China all along? Target is large enough; I’m surprised they’ve not been buying directly from China.

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