How Good is the China Trade Deal? Better Ask Walmart

The U.S.-China trade deal announced in Geneva on May 11, 2025, marks a tentative ceasefire in a tariff war that once threatened to cripple $600 billion in annual trade. But as investors assess the deal’s economic viability, one company’s actions and results tell the real story: Walmart, the world’s largest retailer, has bet billions on maintaining its China supply chain despite 145% tariffs—a decision that could foreshadow whether the deal’s terms will stabilize global trade or unravel under pressure.

The Trade Deal’s Ambiguous Framework

The Geneva talks produced a “great deal of progress,” according to U.S. Treasury Secretary Scott Bessent, but specifics remain hidden. The U.S. had imposed 145% tariffs on Chinese goods, while China retaliated with 125% tariffs, effectively halting bilateral trade. The White House framed the agreement as a step toward resolving the $1.2 trillion U.S. trade deficit with China, but critical details—such as tariff reductions, enforcement mechanisms, or structural reforms—were left undisclosed.

Analysts speculate that the U.S. may lower tariffs to 80% if China meets certain benchmarks, but Beijing has yet to confirm this. Meanwhile, Walmart’s response underscores the urgency: the retailer absorbed the full cost of U.S. tariffs to avoid disrupting its supply chain, a move that cost billions but preserved its competitive edge.

Walmart’s China Playbook: Costly, but Calculated

Walmart’s Q1 2025 results reveal a company balancing risk and opportunity. While other U.S. retailers slashed Chinese imports by over 40%, Walmart maintained sourcing, instructing suppliers in Jiangsu and Zhejiang provinces to resume shipments. To mitigate costs, it shifted to FOB (Free On Board) terms, transferring tariff responsibility to U.S. importers, and stockpiled inventory to guard against just-in-time shipping disruptions.

The strategy paid off in key areas:
- E-commerce growth: One-hour delivery orders in China hit 55 million during Chinese New Year, a 40% increase from 2024.
- Membership expansion: Sam’s Club China added 25% more members, driven by renewed engagement in its premium service.
- Marketplace diversification: Walmart’s China platform added 50% more sellers and 80% more SKUs, broadening its product range.

The Risks Lurking in the Deal’s Shadows

Despite these gains, Walmart’s path forward is fraught with uncertainty. The trade deal’s lack of clarity leaves open the possibility of renewed tariffs, especially as the U.S. eyes nearshoring to Mexico and India. For instance, Walmart’s $350 billion commitment to U.S. manufacturing and its USMCA-driven shift to Mexican suppliers could backfire if U.S. tariffs on Mexico escalate.

China’s economy, meanwhile, is buckling under the strain. Its manufacturing PMI fell to 49 in April—the first contraction since 2012—and Goldman Sachs warns 10–20 million jobs tied to U.S. exports are at risk. Beijing’s retaliatory tariffs and restrictions on critical materials like lithium and rare earths further complicate supply chains.

The Bottom Line: Follow the Logistics, Not the Rhetoric

Investors should ignore the political theater and focus on Walmart’s operational metrics. Its decision to absorb tariffs rather than pass costs to consumers signals confidence in China’s long-term value as a supplier. The retailer’s ability to navigate logistical shifts—such as FOB terms and inventory stockpiles—also highlights its agility in a fractured trade landscape.

Yet the risks remain asymmetric. If the U.S. and China fail to lower tariffs meaningfully, Walmart’s margins could squeeze further. Conversely, even a temporary tariff suspension could unlock earnings upside. With Walmart’s international segment growing at 10.7% (constant currency) in Q1—driven largely by China—the company’s performance will serve as a real-time barometer of the trade deal’s success.

Conclusion: The Deal’s Success Hinges on Walmart’s Bottom Line

The 2025 U.S.-China trade deal is less about diplomatic breakthroughs and more about whether companies like Walmart can sustain operations under extreme tariff pressures. Walmart’s Q1 results suggest it’s succeeding—for now—by diversifying suppliers, optimizing logistics, and betting on China’s market potential.

However, the stakes are colossal:
- A full 80% tariff reduction could boost Walmart’s gross margins by 1–2%, based on its 2024 cost absorption estimates.
- A 10% drop in Chinese exports to the U.S. would cost China $60 billion in annual revenue, deepening its economic slowdown.

Investors should monitor Walmart’s inventory levels, supplier diversification progress, and the timing of any tariff adjustments. Until the deal’s terms are concrete, Walmart’s China strategy—and its stock—will remain a litmus test for global trade stability.

In the end, the answer to “How good is the China trade deal?” isn’t in Geneva—it’s in Walmart’s warehouses, delivery trucks, and quarterly reports.