BEIJING — The United States has significantly increased tariffs on imports from China, pushing rates into triple digits. For exporters in China, this escalation means not only higher prices for American consumers but also a potential reshaping of their operational strategies, including a pause on some shipments.
According to Ryan Zhao, director at Jiangsu Green Willow Textile, U.S. consumers might face shortages of specific goods as American firms pull back on textile imports from China. “We predict some products could be unavailable by June,” Zhao stated.
Zhao further noted the uncertainty surrounding price increases on remaining products shipped to the U.S. “Shipping takes two to four months. In the past couple of months, tariffs have surged from 10% to 125%,” he communicated in a recent interview, which was translated by Finance Newso.
The White House has indicated that the effective tariff rate on Chinese imports is now around 145%. Such high tariffs are expected to severely hinder the flow of trade, as noted by an economist from the Tax Foundation in a segment with Finance Newso’s “The Exchange.”
Although American firms are actively searching for alternative suppliers, the trade dynamics between the U.S. and China are unlikely to shift dramatically in the short term.
Tony Post, CEO of Topo Athletic, a running shoe company based in the U.S., shared his plans to increase sourcing from Vietnam in addition to existing suppliers in China. Post remarked that with the initial tariffs this year, China-based suppliers were willing to share the burden of rising costs. However, the recent drastic increases in import duties have outpaced the cost of the products themselves.
“I will have to raise prices, and I’m uncertain what effect that will have on our business,” he expressed, noting that he had projected nearly $100 million in revenue predominantly from the U.S. this year.
Economic ramifications
Efforts aimed at achieving a U.S.-China trade deal to ease ongoing tensions have rapidly diminished as China retaliates with its own set of tariffs on American products and expansive restrictions targeting U.S. businesses.
As a direct consequence of the steep tariffs, it is anticipated that Chinese exports to the U.S. could plummet by as much as 80% over the next two years, according to Julian Evans-Pritchard, head of China economics at Capital Economics.
This shift has prompted Goldman Sachs to downgrade its forecast for China’s GDP growth to 4%, attributing it to the ongoing U.S. trade tensions and a slowdown in global economic growth.
While Chinese exports to the American market represent a mere three percentage points of the country’s total GDP, the impact on employment could be substantial, affecting an estimated 10 to 20 million workers tied to export businesses aimed at the U.S. market, according to Goldman Sachs analysts.
In response to its slowing economy, China is exploring ways to increase domestic sales, with the Ministry of Commerce meeting with key business groups to discuss strategies to bolster local consumption.
However, recent data indicates that consumer spending in China remains tepid, compounded by a further decline in consumer price inflation.
“The domestic market in China cannot absorb the existing supply, let alone additional amounts,” remarked Derek Scissors, a senior fellow at the American Enterprise Institute. He anticipates that Beijing might revert to its prior approach of concessions to the U.S., dumping surplus products in other markets, subsidizing struggling businesses, and letting some firms close down. Such a diversion to other countries could create increased trade barriers while subsidies could worsen domestic debt and inflationary pressures.
This year, China has prioritized strengthening consumption, expanding subsidy programs for consumer goods trade-ins, especially in home appliances. Tsinghua University professor Li Daokui noted that initiatives to further enhance consumption could be unveiled within the next ten days.
Challenges in replacing imports
Despite the U.S. government’s push over recent years to encourage domestic manufacturing, especially in the high-tech sector, businesses and analysts agree that establishing new production facilities and securing experienced labor will be challenging.
Ford recently highlighted its struggles in a request for a tariff exemption, stating that it is unable to obtain equivalent manufacturing equipment from U.S. sources. “A U.S. supplier would not have the specific experience needed for the handling and heating processes,” the company explained.
Large corporations, including Tesla, have filed similar requests for exclusions from the U.S. tariffs.
A significant portion of goods is uniquely sourced from China; Goldman Sachs estimated that for 36% of imports from China, over 70% can only be supplied by Chinese suppliers. This suggests that U.S. importers may struggle to find alternatives amid rising tariffs.
Conversely, only about 10% of Chinese imports consist of goods relying on American suppliers, the report revealed.
China has also shifted focus towards higher-end manufacturing. The U.S. continues to depend on China for a variety of products, including computers, machinery, home appliances, and electronics, as noted in recent research.
Diversification efforts
Data from the U.S. Census Bureau indicates that China was the second-largest supplier of U.S. goods in 2024, with a 2.8% increase in imports to $438.95 billion. Mexico emerged as the top supplier starting in 2023, while imports from Vietnam, benefiting from the re-routing of goods, have more than doubled since 2019.
Several prominent Chinese textile firms have begun relocating some of their production operations to Southeast Asia, Zhao remarked.
Zhao elaborated that his company is actively seeking to cultivate customers in Southeast Asia, Latin America, the Middle East, and Europe to lessen dependence on the U.S. market, while acknowledging that the burden of additional tariffs is not sustainable for a company that posted a modest 5% net profit last year.
China’s trade with Southeast Asia has surged since 2019, establishing the region as China’s largest trading partner, followed by the European Union and the U.S., based on Chinese customs data.
Chinese President Xi Jinping is scheduled to visit Vietnam on Monday and Tuesday, with plans to proceed to Malaysia and Cambodia later in the week, according to reports from China’s foreign ministry.
Deborah Elms, head of the Hinrich Foundation, speculated during a Finance Newso interview that new regulations could emerge to address Chinese content in products ultimately imported into the U.S.
Trump announced a halt to proposed heavy increase in tariffs affecting multiple countries, excluding China. This pause provided temporary relief to stakeholders like Steve Greenspon, CEO of Honey-Can-Do International in Illinois, who has shifted more production to Vietnam since Trump began his tariff policies.
“This intermission allows us to maintain our operations outside of China, but long-term business planning remains uncertain,” Greenspon remarked. “Predicting market conditions in 90 days is exceedingly difficult.”
Some analysts theorize that the pressing economic circumstances might steer both the U.S. and China towards negotiating a deal.
Gary Dvorchak from Blueshirt Group noted that the recent hike in tariffs announced only days prior could serve as a negotiatory tactic intended to facilitate an eventual agreement in the coming days.
Despite heated rhetoric from both sides, Dvorchak argues that both nations have considerable stakes that could be jeopardized if the tariff situation becomes permanent, warning that a U.S. embargo on Chinese goods could plunge China deeper into economic despair.
