China’s position as a global manufacturing powerhouse seems unshakable, even in the face of potential new tariffs from the U.S. If former President Donald Trump wins a second term and imposes more severe tariffs, industry insiders believe that China’s competitive pricing will continue to draw international buyers.
At the recent Canton Fair in Guangzhou, the sentiment was clear: tariffs are not a major concern. Many exhibitors and buyers shrugged off the possibility of an escalating trade war, emphasizing that the appeal of China’s low prices is hard to resist.
“My customers told me even a 50% tariff won’t come close to driving them away,” said Jack Jin, a seller of cargo-control tools and truck parts from southeast China. Jin noted that about half his orders are from the U.S., where his products can be sold at four times their purchase price.
Trade tensions are rising during this U.S. election year, with accusations against China for dumping goods and unfairly subsidizing industries. The targeted products list is expanding to include metals, ships, and electric vehicles. Trump has mentioned a potential across-the-board tariff exceeding 60%, while President Joe Biden, his opponent, has pledged to triple tariffs on Chinese steel. The European Union is also probing Chinese EV subsidies, which could lead to new tariffs, and is scrutinizing the solar and rail industries.
Despite these threats, traders at the Canton Fair believe the global market will still rely on Chinese goods. They are finding ways to mitigate tariff impacts, and even buyers exploring alternative supply chains expect China to remain their primary source due to its unmatched quality and cost.
Strategies and Adaptations
Samuel Jackson, a buyer for a Bosnian furniture company, shared that he can obtain products of “very, very similar” quality at half the price compared to European suppliers. He acknowledged that tariffs might have some impact but emphasized China’s vast market and diverse customer base.
For Alex Student, an auto accessories importer from California, it’s U.S. consumers who bear the cost of tariffs on Chinese goods. His retailers resisted price increases when Trump imposed tariffs, prompting him to negotiate cheaper versions of products with Chinese suppliers. “At the end of the day, who paid? The consumer,” Student remarked, highlighting the trade-off between product quality and cost.
Student also described using Free On Board (FOB) pricing to offset tariffs, shifting logistics and warehousing costs to his U.S. customers and reducing the tariff-based sale price. “There are many ways to skin the cat,” he said.
Global Appeal of Chinese Goods
Chinese products remain attractive even to buyers from less developed countries. Daniel Lulandala, a machinery trader from Tanzania, was on his first trip to China and was thrilled to negotiate directly with manufacturers. The low prices at the Canton Fair inspired him to consider expanding his business, including opening a factory back home using a Chinese machine costing about $8,000. He expects to recoup his investment within three months.
The Canton Fair organizers reported that of the 125,000 foreign buyers attending through April 19, only 18% were from the U.S. and Europe. This shift is attributed not only to trade tensions but also to well-established ties with these economies and the increasing participation from emerging nations in Beijing’s Belt and Road Initiative, up from about half a decade ago.
Concerns and Contingency Plans
Not all participants were entirely optimistic. A saleswoman from a Shanghai plastic strapping producer expressed concerns about another Trump presidency. She mentioned her company’s struggle to innovate despite falling profits, likening the business environment to a rat race.
Jin, the truck-part seller, admitted being “a little” worried about Trump’s unpredictability compared to Biden. He also noted growing competition from other emerging nations, like India, where producers offer lower prices due to the absence of tariffs.
Student, the auto accessories importer, has started exploring “contingency plans,” sourcing goods from Vietnam and considering Thailand and Indonesia. However, he believes these countries still lag far behind China in terms of competitiveness. Even in a “worst-case scenario,” he anticipates that China will continue to supply about 75% of his business needs. “I can’t foresee it being less,” he concluded.
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