It’s beginning to look a lot like a costly Christmas — Chinese suppliers are raising prices for Walmart, Costco and consumers' wallets will feel it

Chinese suppliers to major U.S. retailers, including Walmart and Costco recently told Bloomberg (2) journalists they'll raise prices for the first time in years as raw material costs surge across their supply chains.

"For these 'you just can't skip it' holiday items, buyers have a relatively high tolerance for price increases, as long as suppliers don't overreach," said Cai Qinliang, secretary-general of the Yiwu Christmas Products Industry Association.

"They don't have much choice, right? Raw material prices are rising globally and across China, so rejecting higher prices effectively means giving up the business this year." Cai added, noting to Bloomberg that even artificial Christmas trees have climbed as much as 10%.

Suppliers have started raising prices on holiday orders being placed now, setting up higher costs for products that will hit store shelves by October (6). For big-box retailers, prices are rising by up to about 5% on some goods. For smaller merchants, including independent toy shops, home décor boutiques and regional chains, the increases are as high as 15%.

Why Chinese factories are pushing back

For three and a half years, Chinese factories have operated in deflationary mode. They cut prices, competed aggressively and absorbed overhead costs to hold on to customers. That era ended this spring, and it ended quickly (3).

China's producer price index jumped 2.8% from a year earlier, the fastest pace since July 2022 and well above economists' forecasts, as commodity costs linked to the Iran war delivered a sharp inflationary shock (4).

The chain reaction is straightforward: The US-Iran war disrupted oil flows through the Strait of Hormuz, oil prices spiked and petroleum is a key ingredient in plastics, synthetic textiles and chemicals. In other words, it is woven into nearly everything China manufactures and exports. Industrial transportation fuel costs rose 10% in March alone, according to official Chinese economic data (5).

At the same time, operating a factory in China has become more expensive. Wages are higher than they were five or 10 years ago, electricity bills have risen across several industrial provinces and materials such as plastic resin, aluminum and cardboard packaging now carry higher prices. Banks have also become more cautious about lending to exporters as global demand cools. The old strategy of making up for razor-thin margins with sheer volume is no longer sustainable.

Major retailers also spent much of 2025 pressuring suppliers to absorb tariff costs. Bloomberg previously reported (7) that Walmart asked some Chinese manufacturers for price cuts of as much as 10% during tariff rounds tied to trade policies under President Donald Trump. Chinese trade officials even summoned Walmart executives after suppliers were squeezed by demands.

What retailers are doing — and what that buys you

Walmart and Costco both declined to comment.

For now, both retailers are keeping shelf prices steady. Their vast scale gives them an advantage that smaller retailers don't have. If they need to absorb or pass on costs, they can spread modest increases across thousands of unrelated products, making any single price hike less noticeable to shoppers, according to Jennifer Bartashus, a senior analyst at Bloomberg Intelligence.

That scale provides a temporary cushion for consumers. But it has its limits, and it offers little relief to smaller retailers facing wholesale price increases of up to 15% with no comparable buffer.

What gets to your cart by December

As higher manufacturing costs move through the supply chain, shoppers should be more prepared to pay more when holiday inventory arrives in October.

Executives at Kraft Heinz (8) and McDonald's (9) have already flagged that lower- and middle-income consumers are aggressively tightening their belts. Unstable energy markets linked to the Iran war, combined with a strong Chinese yuan, are making exports from China more expensive.

That means holiday discounts may be less generous this year.