This paper investigates how government fiscal constraints transmit to the private sector through procurement. We exploit three rounds of VAT rate cuts in China (2017–2019) as exogenous shocks to local government revenues. Combining city-level fiscal pressure measures with 9,189 procurement contracts from A-share listed firms, we construct a firm-year exposure index weighted by procurement volumes across cities. We find that exposure to fiscally stressed government buyers significantly depresses firm valuation: a one-standard-deviation increase reduces Tobin's Q and price-to-sales ratios by 5.3% and 4.3%, respectively. This effect concentrates among private firms, those lacking industrial policy support, and firms with lower rent-seeking expenditures—precisely those with weaker bargaining power against government counterparties. Beyond valuation, such exposure leads to a subsequent deterioration in firm fundamentals, characterized by tightened liquidity constraints, reduced investment and financing, and worse information disclosure over a three-year horizon. Land finance partially buffers these effects. Our findings highlight an unintended micro-level consequence of macro fiscal policy: expansionary tax cuts designed to stimulate the private sector may inadvertently harm firms by weakening the government's capacity to fulfill procurement payments.