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Target Tells Suppliers To Eat Higher Tariff-Related Costs

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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