WASHINGTON • US Treasury Secretary Steven Mnuchin said he was personally questioning some of the US' largest companies about their plans for weathering the Trump administration's trade war with China, including encouraging firms to reorient their supply chains and source their products from elsewhere.
The discussions come as the trade dispute between the US and China shows no signs of abating, and suggest that the Trump administration is digging in for a protracted battle that could inflict substantial pain on consumers.
US President Donald Trump recently raised tariffs on US$200 billion (S$276 billion) worth of Chinese goods and has started the process to tax nearly all Chinese imports into the United States.
At a House Financial Services Committee hearing on Wednesday, Mr Mnuchin said he spoke to the chief financial officer of Walmart - which recently warned that customers would see higher prices on furniture, clothing and accessories because of the duties on Chinese imports - about how the company plans to proceed.
"I can tell you I am monitoring the situation very carefully," Mr Mnuchin said, adding that he spoke to the Walmart executive this week to "specifically understand from the retail giant what things they can source from other areas and what items they can't".
Companies have already been diversifying their supply chains away from China, and accelerated those plans in the past year as Mr Trump ramped up tariffs on Chinese imports.
The outreach by Mr Mnuchin, one of Mr Trump's closest economic advisers, underscores how sensitive the administration is to the prospect of retailers raising prices and blaming tariffs as the election cycle draws near.
Retailers have been pushing back hard against the tariffs, expressing concern that their customers are caught in the cross-hairs of the trade war.
Target warned on Wednesday that tariffs would lead to "higher prices on everyday products for American families", and said it was also working on contingency plans. Walmart has said that it is working on strategies to mitigate the pain of the tariffs to keep prices low.
Mr Mnuchin said that his "expectation is a lot of this business will be moved from China", and that there will be only a small number of items where tariffs are passed on to consumers.
While he has privately cautioned against tariffs, on Wednesday, he argued that depreciation of China's currency could blunt some of the effects of the tariffs by making Chinese products cheaper to buy.
He also said it was not certain yet that the next round of tariffs would be imposed, noting that Mr Trump and Chinese President Xi Jinping will most likely meet at the Group of 20 Summit next month in Japan.
However, Mr Mnuchin was far less optimistic about a deal than he was just a month ago. "We were beginning to send out the date for the two presidents to meet and have a signing ceremony," he said. "Unfortunately, China has taken a big step backward."