Key Points:
- Chinese manufacturers are pausing production and exploring new markets in response to the latest U.S. tariffs, according to businesses and analysts.
- The decline in orders is affecting employment and prompting exporters to adopt new strategies, including domestic livestreaming sales.
- Some Chinese companies have already expanded into other international trade routes.
BEIJING —
Manufacturers in China are slowing production and searching for alternative markets as recently increased U.S. tariffs take effect, businesses and analysts report.
The shift is impacting jobs in key export hubs such as Yiwu and Dongguan, with some factories temporarily furloughing workers. Cameron Johnson, senior partner at Shanghai-based consulting firm Tidalwave Solutions, noted that producers of toys, sporting goods, and low-cost consumer goods are particularly affected.
“While not large-scale yet, it is happening in key export hubs, and there is concern it may grow,” Johnson said. “There is hope tariffs will be reduced, but for now, companies are idling some production.”
According to Goldman Sachs, approximately 10 to 20 million workers in China are engaged in export businesses targeting the U.S. market. For context, China’s urban workforce totaled 473.45 million in 2024.
Earlier this month, the U.S. government introduced tariffs exceeding 100% on a range of Chinese goods, prompting retaliatory measures from China. While U.S. President Donald Trump indicated trade talks were ongoing, Chinese officials denied that negotiations were underway.
Ash Monga, CEO of Guangzhou-based Imex Sourcing Services, described the tariff impact as greater than that of the Covid-19 pandemic for small businesses. He noted that many smaller firms may struggle to remain viable under the new tariff regime. In response, his company plans to launch a “Tariff Help” platform to connect businesses with suppliers outside China.
Shift to Domestic Livestreaming
The disruptions have also led exporters to explore domestic sales channels. Ningbo-based athleticwear company Woodswool began livestreaming sales in China and reported more than 30 orders, generating gross merchandise value of over 5,000 yuan (approximately $690) within the first week.
“All our U.S. orders have been canceled,” said Li Yan, factory manager and brand director at Woodswool. The company anticipates two to three months of idle capacity while new markets are developed.
Woodswool utilizes Baidu’s e-commerce livestreaming platform, which offers virtual human presenters through AI technology, allowing businesses to quickly enter the domestic online retail market. Baidu stated it has supported hundreds of companies with subsidies and free AI tools to promote domestic e-commerce initiatives.
Challenges in the Domestic Market
Major Chinese e-commerce and delivery platforms such as JD.com and Meituan have pledged to support domestic sales of export-oriented goods. JD.com committed 200 billion yuan ($27.22 billion) to purchasing goods initially intended for export. However, this amount represents only about 5% of China’s exports to the U.S. in 2024.
Michael Hart, president of the American Chamber of Commerce in China, noted that under the new 125% tariffs, some business models are no longer sustainable. He also reported increased competition among Chinese companies in recent weeks.
Products originally designed for U.S. consumers may not easily transition to China’s domestic market, according to analysts. Companies have turned to social media platforms like Red Note and Douyin (the Chinese version of TikTok) to engage domestic consumers, although signs of market fatigue are emerging, said Ashley Dudarenok, founder of the China marketing consultancy ChoZan.
Exploring New International Markets
Many Chinese businesses are also diversifying away from the U.S., seeking opportunities in markets such as Europe, Latin America, and Southeast Asia.
Beijing-based e-commerce company Mingyuchu, which sells bathroom products, has focused on Brazil despite challenges like currency fluctuations and shipping costs. CEO Liu Xu expressed confidence that trade with Brazil would remain stable despite broader geopolitical tensions.
Similarly, Ghana-based Cotrie Logistics, founded during the pandemic, has capitalized on growing trade between China and Africa. CEO Bright Tordzroh said the U.S.-China trade tensions have encouraged companies to consider alternative sourcing and manufacturing strategies, presenting new opportunities for his logistics business.
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