Christmas Suppliers Are Eating the Hormuz Premium. Walmart Shoppers Will Pay Some of It.

An artificial tree factory in Yiwu, the Chinese city that makes most of the world’s Christmas decor, is running 10% higher per-unit costs this spring than it did last year. The factory’s owner told CNBC her revenue is down roughly 12% because customers have delayed orders, and she expects U.S. shoppers will pay at least 15% more for her trees this season. The American Christmas Tree Association estimates 87% of Christmas decor sold in the U.S. is sourced from China, with Yiwu as the concentration point.

That data lands inside a Walmart seasonal buying cycle that is already largely committed. Yiwu’s factories typically finalize product plans and begin mass production in the first half of the year, with shipments leaving Chinese ports in early Q4 to reach U.S. shelves by October. The cost spike is arriving while those POs are still being written or, for core replenishment SKUs, already signed.

Oil Is the Hidden Ingredient in Every Artificial Tree

The proximate cause is the Strait of Hormuz, which has been largely closed to commercial shipping since February 28, when U.S. and Israeli strikes on Iran triggered Iranian closure of the waterway. Approximately 20% of the world’s seaborne oil and a significant share of global LNG passes through the strait under normal conditions. Brent crude was trading near $90 per barrel on April 19 after Iran re-closed the strait over the weekend, and the U.S. national average for gasoline was $4.05 per gallon, compared with $2.98 before the war began, according to CNN reporting citing AAA.

For Christmas decor, the cost transmission is direct. Artificial trees, tinsel, ornaments, inflatables, and most plastic packaging are PET-based or petrochemical-derived. Ocean freight has absorbed its own shock: Maersk has suspended Gulf crossings on affected services and is rerouting around the Cape of Good Hope, adding roughly 3,500 nautical miles and about $1 million in fuel costs per voyage, expenses Supply Chain Magazine reports will be passed to consumers. A tinsel manufacturer in Yiwu’s export expo center told CNBC her plastic input costs are up as much as 40%.

Suppliers are also facing a demand-side timing problem. Chen Lian, a Yiwu Christmas lights maker, told CNBC that buyers are moving up delivery schedules to protect against further transit delays, and that concentrated demand between May and August will push material prices higher still. For a Walmart seasonal buyer working a line that was priced against 2025 landed-cost assumptions, the gap between PO cost and actual cost is widening week by week.

The 1P Seasonal Supplier Has the Worst Seat

The supplier segment carrying the most exposure is 1P direct seasonal decor. These are the partners whose goods sit on Walmart’s October-to-December planograms, who signed POs months ago under fixed pricing, and who now have to decide whether to eat the input cost increase, invoke force majeure or material adverse change language if their contracts allow, or negotiate cost-increase submissions that Walmart merchant teams will push back on hard.

Walmart’s posture on input costs has been public and consistent. CEO Doug McMillon said on the company’s August 2025 earnings call that costs were climbing weekly and would continue to do so into the third and fourth quarters. The company’s response across tariff cycles has been to protect shelf prices and push cost absorption upstream where possible. For suppliers whose landed cost inputs moved after the PO was locked, the lift request this cycle is competing against every other supplier in every other category making the same ask.

The implication for 1P replenishment teams is to model a realistic absorb-versus-pass split now, before May, and bring documentation that isolates the Hormuz-driven cost layer from general inflation. Walmart merchants are going to distinguish between suppliers who can show a specific, quantified, externally verified cost event and suppliers making a general argument about a tough year.

Marketplace Sellers Have More Levers, But the Window Is Tight

For 3P Marketplace sellers moving Christmas decor through WFS, the cost picture is the same but the pricing flexibility is greater. Sellers can raise retail prices directly, adjust promotional cadence, or choose to sell through current inventory at 2025 economics and skip restocks if input costs don’t support margin.

The constraint is timing. Walmart’s peak season runs October through December, and WFS peak storage fees run $1.50 above regular pricing for units stored more than 30 days during that window, according to Walmart’s 2025 Holiday Hub. A 3P seller who waits to see where input costs settle before placing a refill order risks either missing the inbound deadline or paying peak storage on inventory that arrives too late to turn.

The cleaner play for 3P sellers is to finalize seasonal decor inbounds earlier than usual, even if that means committing at elevated landed costs, then pricing to reflect the new cost basis. Sellers who front-load inventory before the May-to-August demand concentration Chen Lian described will also avoid the secondary material cost spike Yiwu manufacturers are projecting.

The Walmart Position Is Structurally Better, Which Is Not the Same as Good

Coresight Research President Max Kahn told CNBC in March that value retailers including Walmart are positioned to handle the disruption better than discretionary-heavy competitors, because shoppers under pressure from gasoline prices will trade down toward value-priced items.

That relative advantage does not reach the supplier level. Walmart’s ability to hold shelf prices depends on suppliers absorbing cost or on the company substituting to lower-cost alternatives within the assortment. Walmart is the largest U.S. importer of containerized goods and its Great Value private label sources more than 70% of non-food household items from China, according to Zacks Investment Management cited by PYMNTS. That concentration means the input cost pressure in Yiwu is not isolated to a seasonal decor aisle. It is a representative case of a broader exposure that will show up across categories through the balance of the year.

For suppliers, the strategic picture is that Walmart’s relative insulation from the Iran war is a demand-side story, not a supply-side one. The retailer will likely see traffic hold up or improve as discretionary-heavy competitors lose share. The cost of delivering that traffic is going to be paid somewhere in the supplier base. The Yiwu tree factory owner’s 15% projection for U.S. shelf prices is her estimate of the portion she cannot absorb. How much of that reaches Walmart planograms, versus stops at the supplier’s margin line, will be decided inside the May-to-August production window Yiwu factories are running now.

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