Under Trump’s newly unveiled “reciprocal tariff” system, Chinese exports face a 34% increase on top of the existing 20% duties, pushing total tariffs to 54% starting 9 April. Simultaneously, the US will end duty-free exemptions for small parcels valued under US$800 and impose new tariffs by 1 June. Chinese manufacturers are scrambling to respond after US President Donald Trump announced sweeping new tariffs on Chinese goods, delivering the heaviest blow yet to industries already reeling from years of trade tensions. Under Trump’s newly unveiled “reciprocal tariff” system, Chinese exports face a 34% increase on top of the existing 20% duties, pushing total tariffs to 54% starting 9 April. Simultaneously, the US will end duty-free exemptions for small parcels valued under US$800 and impose new tariffs by 1 June. The tariff hikes hit labour-intensive industries hardest. For apparel, furniture and footwear companies, total tariff rates could now reach 79% — levels most cannot survive. Employees work on a production line of caps that will be exported to the United States at a factory in Suqian, Jiangsu province, China, on 7 April 2025. (AFP) The double blow to traditional exports and e-commerce has shocked Chinese factories already under pressure. Apparel products were hit with a 25% tariff during Trump’s first term, followed by two additional 10% hikes this year. Wong said US importers have told clients they plan to cut sourcing from China from 80% to zero, citing weak consumer demand. Many manufacturers had shifted to direct-to-consumer e-commerce in the US to sidestep middlemen. Now, with the loss of small-parcel exemptions, that strategy is collapsing. Wong said his company has stopped investing in the US and is redirecting efforts toward semi-managed exports via overseas warehouses while expanding into Europe through platforms such as TikTok. The tariff hikes hit labour-intensive industries hardest. For apparel, furniture and footwear companies, total tariff rates could now reach 79% — levels most cannot survive. Many exporters say they no longer care whether the final tariff is 54% or 79%, given their slim 10% to 15% margins. In January and February, China’s exports of clothing, furniture, footwear, hats and toys to the US already fell sharply year-on-year. Facing growing pressure, Chinese exporters are now scrambling to find new markets in Southeast Asia, Europe and Russia — but hurdles are high, including payment risks in Russia and fierce competition in Southeast Asia. Meanwhile, plans to move production to Southeast Asia have stalled. Wong said his company stopped building on a 90-acre manufacturing facility in Vietnam after Trump announced that goods from Vietnam would face tariffs as high as 49%. Under these tariffs, moving capacity abroad no longer makes sense, he said. Facing mounting trade barriers, Chinese manufacturers are calling for industrial upgrades and stronger intellectual property protection. Exporters interviewed by Caixin said that European and American supply chains remain too weak to fully replace China’s manufacturing base. Without price advantages, survival depends on innovation and higher quality. ‘We have to develop new products faster and protect them from being copied if we want to maintain pricing power. If we keep competing on low prices, none of us will survive,’ Wong told Caixin. Trade experts warn that Trump’s tariffs will reshape global manufacturing patterns. The biggest losers may not be China or the US, but other developing nations now forced to compete with China’s highly efficient, low-margin manufacturers, said Craig Allen, senior counsellor at the Cohen Group. The US remains China’s largest trading partner, accounting for 14.7% of total exports in 2024, worth US$524.66 billion. China’s top exports to the US — machinery, steel, aluminium, plastics, clothing, toys and furniture — are largely labour-intensive products, now firmly in the crosshairs of higher tariffs. Labour-intensive sectors hit A report by China Chengxin Credit Rating Group warned the impact would be especially severe for raw materials and labour-intensive sectors. Analysts expect exports to stay under pressure as trade tensions escalate and supply chains shift. Chinese labour-intensive industries were already struggling under earlier tariffs of up to 25% imposed during Trump’s first term. Since then, exports to the US have steadily declined. According to Chinese customs data, exports of furniture, bedding, lighting and toys in 2024 fell 21% from their 2021 peak, while footwear and apparel exports dropped 25% in 2023 before recovering slightly last year. Hu Jie, professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, said Chinese factories had absorbed much of the earlier costs through discounts and cost-cutting, but warned they are now at the limit. ‘Giving up the US market isn’t realistic,’ said Hu. ‘But absorbing further tariffs will be extremely hard.’ With margins often below 20%, splitting tariff costs with US buyers increasingly results in direct losses. ‘Some large factories shipping millions of products each month are operating at near-zero margins,’ said a Guangdong handbag exporter. ‘And with the US buying 30% of the world’s footwear and apparel, finding new markets quickly isn’t easy.’ The tariff hikes have hit China’s major industrial belts — Guangdong, Fujian, Shanghai and Qingdao — particularly hard. Some areas account for half of the global output in categories such as toys. Chenghai District in Shantou alone produces 50% of China’s plastic toys and a third of global supply. Exporters now face a grim choice: pass higher costs on to American consumers or absorb the tariffs themselves. ‘Historically, tariffs are ultimately paid by American businesses and consumers,’ said Han Lijie, a partner at Katten Muchin Rosenman LLP. Meanwhile, Chinese exporters with stronger innovation and brand strength may weather the storm better, while weaker players risk being pushed out. Some companies are already walking away. A Dalian-based glassware exporter said US buyers absorbed earlier tariffs but warned they would now rather abandon the American market than make further concessions. ‘Better to lose the market than to feed the tiger,’ the exporter said. Negotiations between Chinese and American firms are growing tougher. One textile exporter said an American client demanded price cuts to offset tariffs but talks stalled even before the latest 34% hike. With margins squeezed, exporters expect bargaining to become even more difficult. Still, some see opportunity in adversity. Wu Yuqin, head of Shantou Feiying Technology Co. Ltd., said several toy exporters gathered at his office on 2 April after all US orders were abruptly halted. Wu believes that investing in artificial intelligence (AI) could help China’s toy industry rebound. ‘Europe doesn’t have what China’s AI sector can offer yet,’ he said. ‘If we can launch AI-driven toys and update faster than copycats, we’ll find new markets.’

China’s export machine stalls under Trump’s new trade blitz

Under President Trump's newly announced 'reciprocal tariff' system, Chinese exports face a 34% increase on top of existing 20% duties, pushing total tariffs to 54% starting April 9. Simultaneously, the US will end duty-free exemptions for small parcels valued under $800 and impose new tariffs by June 1. The tariff hikes hit labor-intensive industries hardest, including apparel, furniture, and footwear, which could now face total tariff rates of up to 79%. This has pushed many Chinese manufacturers to redirect efforts towards Europe and Southeast Asia, while others are calling for industrial upgrades and stronger intellectual property protection.