Donald Trump is a business ‘killer’ who ‘never plays by the rules’, say Chinese exporters after tariff threat
US President Donald Trump is a business “killer” who “never plays by the rules”, according to China’s manufacturers who have been left reeling by the news that tariffs will be increased from 10 per cent to 25 per cent on US$200 billion of Chinese imports into the United States.
Trump issued the threat to increase the tariffs in a tweet on Sunday, changes which were confirmed US trade representative Robert Lighthizer some 24 hours later, with the new rates set to become effective at 12.01am on Friday morning US time.
“Those manufacturers who mainly sell to Europe and the United States need to start taking pain killers again,” said exporter Liao Yu, who produces bags and suitcases in Dongguan.
“The cost of relocation is very high for small factories of our kind. But if you don’t move, how do you digest the tariffs? A 25 per cent [tariff] will kill everyone. Meanwhile, European and American customers are now using more suppliers in Southeast Asia to replace us. Trump is just a killer.”
Another US$325 billion of Chinese imports, which are currently not subject to trade war tariffs, are also under threat, with Trump citing the apparent slow progress of the trade talks for the somewhat surprise move to increase the tariffs which had been suspended altogether since December after the US president met with Chinese counterpart Xi Jinping in Argentina.
“We thought our products would be safe and excluded from the list [subject to US tariffs]. But Trump never plays by the rules and it seems no one from China’s side is able to contend with him,” said Gloria Luo, who manages a Guangdong-based manufacturer of automotive parts and industrial moulds.
Chinese Vice-Premier Liu He, who has been leading the negotiations for Xi, is still expected to be part of the delegation set to arrive in Washington on Thursday for talks, Lighthizer said on Monday.
“I was so surprised when I saw that the stock market had tumbled sharply, until I saw that many of my friends had shared Trump’s tweet via WeChat,” said Shenzhen-based exporter Zheng Bo, who sends about 15 per cent of its smart helmets to the US.
“My team and I have been busy studying whether our products would be included on the list of US$325 billion worth of goods and what we should do next. It’s really hard to absorb the news because the [Chinese] media is just reporting repeatedly that both sides had made positive progress in the latest talks and would reach a final deal soon.
“The bigger problem [with the higher tariffs] is that they will cause great uncertainty about the yuan [exchange rate]. It will cause huge damage to our orders and profits.”
The scheduled increase has forced some to rethink plans to relocate from China to other countries, mainly in Southeast Asia.
“[Trump’s threat] means a fundamental change for those of us who used to fill American orders, either we must relocate to other countries or suffer great hardship,” said Jason Liang, a sales manager at a Guangzhou-based exporter of LED products.
“There’s a huge difference between [the effect of] a 10 per cent tariff and a 25 per cent tariff. No factory could absorb the tariff costs that are that high.
“[The rise] would only result in massive lay-offs at a large number of export-oriented companies, not to mention [the effect of the new] 25 per cent tariffs on an additional US$325 billion of Chinese goods.
“If you go to Dongguan and take a look, you will see Dongguan’s factories are already depressed. New American customers looking to do business with us will first ask if we have a production base in Vietnam or other foreign country. Only those with supply capacity overseas will be preferable.
“Last November, we planned to sent a team to Vietnam to prepare for Vietnam-based suppliers as a backup but delayed the plan due to the trade war truce. Now some of our Chinese suppliers deeply regret [that decision] and are thinking of restarting the plan to move to Thailand or Bangladesh as soon as possible.”
The higher tariffs would be a further heavy blow to trade between China and the US, especially the textile industry, said Liu Yi, founder of Ebudaowei.cn, which matches supply with demand for fabrics.
“The continued, uncertain trade war is destroying the market’s confidence in China’s economy. China’s current economic prosperity has been brought about by real estate, not by real manufacturing, and the [property] bubble is very big. So China’s economy is, in a sense, ostensibly prosperous.” Liu said.
“Now the economic competition between the two countries is hurting private enterprises. The manufacturing industry is suffering from both internal and external troubles,” he added, citing the combined effects of rising inflation, soaring labour and raw material costs as well as various types of taxation.
For a limited few, though, Trump’s tweet brought some positive news as it justified decisions to relocate production overseas.
“To a certain extent, it was good for us, because our relocation investment is finally starting to pay off,” said Linda Chen, a sales manager for a company that produces mounts for tablets, which set up a new factory of about 300 workers in Vietnam last year.
“Many American clients were still not ordering from Vietnam because the shipping cycle in Vietnam’s factories is longer than that in [China], and their Chinese suppliers were willing to absorb the 10 per cent tariff cost. Now they will only order from factories in Southern Asian counties and Mexico.”
Vietnam is already benefiting from the trade war as companies seeks alternatives to avoid the tariffs imposed on Chinese imports.
“The horn of the trade war is about to blow again, and we are ready to see a new round of Chinese factories come [to Vietnam],” said Gao Jian, whose Vnocean Business Consulting Service has helped many Chinese enterprises move to one of the more than 50 industrial estates in Vietnam. “Those who kept watching and hesitated to relocate are in a hurry now. But the costs of moving factories to Vietnam have soared compared to last year and will rise further.”
Source: South China Morning Post