THE US-China deal temporarily lowering tariffs comes as a relief for Chinese exporters in limbo since the onset of a trade war between the world’s two largest economies.
The Trump administration’s 145% duties on most Chinese imports will be cut to 30% by May 14, while China’s 125% retaliatory levy on US goods will drop to 10% during a 90-day cooling off period, Beijing and Washington said Monday following negotiations in Geneva.
The US is also lowering to 54% the 120% “de minimis” tariff on small parcels that were previously exempt from duties, a tax that’s already led to price adjustments on e-commerce platforms Shein Group Ltd. and PDD Holdings Inc.’s Temu.
For one Shanghai-based medical equipment maker, the easing trade tensions will allow it to shelve planned job cuts and production line closures slated for later this month. That will provide some breathing room, but won’t alter efforts to shift some manufacturing out of China and avoid the remaining tariffs, said Pang Ling, a sales manager of the company which employs hundreds of workers and relies on the US for about half of its $70 million in annual sales.
“Now, we don’t need to let anyone go,” she said in a phone interview. “I’m confident about this year’s sales from the US again.”
Many Chinese factories that make everything for export from coffee machines to yoga pants have halted shipments to the US and idled assembly lines — with some operating just three or four days a week — after President Donald Trump singled out China for especially high tariffs in April.
Demand soared for many Chinese-made products on platforms like Temu and Shein before tariffs came into effect. Sales on the two platforms tanked afterward.
Still, even as China started feeling economic pain, President Xi Jinping saw a surge of nationalism in the mainland encouraging him to avoid bending to the US. At the same time, Trump faced growing pressure from business lobbies, market players and members of his party.
‘Hooray!’
For Sun Yang, who owns a business selling face- and body-painting tools such as brushes and color palettes on Temu’s online marketplace, the lowered tariffs couldn’t come soon enough as he watched his inventory dwindle at warehouses in the US, which accounts for all of his sales.
“Our whole office was shouting ‘hooray!’ when we read the news,” Sun said from his company’s headquarters in Shenzhen near Hong Kong.
Sun saw mid-double-digit sales growth in the past two months as American consumers hoarded products before prices skyrocketed.
“Returning to 30% means we have no pressure from price hikes in the foreseeable future,” said Sun. “I hope consumers can gain more confidence and come back to shop again.”
With a cease fire in the US-China trade war, Guangzhou-based freight forwarder Bruce Wen expects a flood of new orders in the next few days — after a very quiet April.
“Ports will all be busy again,” said Wen, who ships everything from kitchenware to decorative license plate frames. “Actually, we have started to see some urgent clients coming back in the past two weeks, now there’ll be much more in the coming weeks.”
The de-escalation prompted Lily Lu, owner of a clothing accessories exporter in the eastern coastal province of Zhejiang, to plan a call with her US customers. “I’m reaching out to my US clients tonight to see what they think and whether they want to resume some orders,” she said.
Others are more cautious about how Sino-American trade relations may play out. “90 days is too short to talk about adjusting strategies of placing new orders and negotiating new prices,” said Chen Lei, a supply-chain manager for a manufacturer of appliances sold by US retailers such as Walmart Inc. and Costco Wholesale Corp.
“It’s still too risky and irrational for any major US clients to place big new orders,” Chen said, speaking from his office in Foshan, a city in southern China’s Guangdong province. He added that “it’s not new that the US government announced something in the morning and changed completely in the afternoon.” –BLOOMBERG
The post Chinese exporters elated by reprieve in US-China trade war appeared first on The Malaysian Reserve.
