Inside Chinese Factories That May Be Affected by Trump’s New Tariffs
At a factory on China’s east coast, machines hiss and puff as they shape smooth leather into cowboy boots. The production line keeps moving—cutting, stitching, and assembling boots that were once a big hit in American markets.
“We used to sell about a million pairs every year,” says Mr. Peng, a sales manager at the factory. But things changed after Donald Trump came into power.
According to BBC, Trump introduced tariffs on Chinese goods during his first presidency, which started a trade war between the two biggest economies in the world. Now that he’s back in the White House, businesses in China are worried that history will repeat itself.
Will There Be Another Trade War?
Trade between the U.S. and China has always been a powerful tool in politics, especially now that China’s economy is slowing and depends heavily on exports. Trump has already announced a new 10% tax on Chinese products, on top of the existing ones.
However, BBC reports that Trump is currently focusing on raising tariffs on goods from Canada and Mexico first. This means that China might have a little time to prepare, but many believe that a full-blown trade war is still coming.
Major companies like Nike, Adidas, and Puma have already moved their production to Vietnam. Many Chinese businesses are also looking for alternatives, but not everyone is ready to leave.
The Factory’s Dilemma
Mr. Peng’s factory is one of many struggling to decide its next steps. His boss has thought about relocating to Southeast Asia, like other businesses, to avoid high U.S. tariffs. However, moving would mean letting go of workers who have been with them for over 20 years.
Peng, who has worked there since 2015, calls the factory his “family,” especially after losing his wife and raising his son alone. His boss doesn’t want to abandon the workers either.
But staying in China is risky. The last round of U.S. tariffs in 2019 caused their sales to drop, and they had to cut their staff from 500 workers to just over 200. BBC explains that American buyers are already looking for manufacturers outside China, making it harder for factories like Peng’s to survive.
The Bigger Picture
China became the world’s top manufacturer by producing goods at low costs and in large quantities. Factories like Peng’s have been making cowboy boots for over ten years. But with tariffs making their products more expensive, American companies may stop buying from them altogether.
Even under President Joe Biden, many of Trump’s previous tariffs remained. The European Union has also imposed tariffs on Chinese electric vehicles, accusing China of using government support to dominate the market. BBC notes that Trump has echoed these concerns, saying China’s trade practices give its businesses an unfair advantage.
Beijing, on the other hand, sees these trade barriers as Western countries trying to limit China’s growth. However, China has said it is open to talks with the U.S.
What Does Trump Really Want?
Trump calls tariffs his “biggest power” over China, but no one knows exactly what he wants in return. During his first term, he visited China to ask President Xi Jinping to help him meet North Korea’s leader, Kim Jong Un. This time, he may want China’s help with Russia, possibly to end the war in Ukraine.
BBC also reports that Trump has accused China of allowing fentanyl to be smuggled into the U.S. and could demand that Beijing do more to stop it. Additionally, since Trump recently pushed for a bidding war over TikTok, he might use tariffs as leverage to control the app’s ownership or its underlying technology.
Factories Are Moving—But Not to the U.S.
Instead of returning to the U.S., many Chinese businesses are moving to countries like Cambodia. BBC interviewed Huang Zhaodong, a businessman who has set up two factories there. His factories produce half a million garments a month for American retailers like Walmart and Costco.
For businesses like his, relocating is the only way to avoid tariffs. U.S. buyers now prefer to work with suppliers outside China. Some companies have even warned that if their suppliers don’t move, they will cancel their orders.
According to BBC, Cambodia has become a hotspot for Chinese manufacturers, with 90% of its garment factories now owned by Chinese firms. Chinese investments have built many of the country’s roads and bridges, and even a major highway in Cambodia is named “Xi Jinping Boulevard” after China’s president.
China has also been shifting its focus to other global markets through its Belt and Road Initiative, which has strengthened trade relationships with South East Asia. BBC reports that more than half of China’s exports and imports now come from these partner countries.
What Happens Next?
Trump’s tariffs could raise the cost of many everyday products for Americans, from clothes to electronics. While some U.S. companies might absorb the extra costs, others may pass them on to consumers, making goods more expensive.
At the same time, China is adapting. Even though factories are moving, many still rely on Chinese materials. Huang’s factory in Cambodia, for example, sources 60% of its fabrics from China. And while some industries, like clothing, are relocating, China is shifting toward advanced manufacturing, such as solar panels and artificial intelligence.
A Nervous Wait for Businesses
With so much uncertainty, businesses in China and beyond are bracing themselves. A survey by the American Chamber of Commerce in China found that over half of U.S. businesses are worried that relations between the two countries will get worse.
Mr. Peng, who still hopes to keep his factory running, says he just wants the U.S. and China to find a peaceful solution. “Americans still need these products,” he tells BBC, before heading off to meet new customers.
The trade battle between the U.S. and China is far from over. The question is: who will be affected the most—Chinese factories, American consumers, or businesses caught in the middle?
Credit : BBC
https://www.bbc.com/news/articles/c4g3z22938jo