YIWU, China (AP) — Visitors who bought refrigerator magnets in Times Square or other New York tourist hotspots in recent years were most likely buying the work of Du Jing or one of her fellow exporters in a small Chinese town that supplies the U.S. and the world with tons of small resources.
Du and her husband run Yiwu Xianchuang Handicraft Manufacturing in the eastern city of Yiwu, home to the world’s largest wholesale market. Products from here – ranging from cuddly toys to glass vases and portable toolboxes – are sold in stores and on online platforms around the world, including to US consumers on Amazon.
For years the United States has been a major destination for Chinese goods, but exporters like those in Yiwu have reduced their dependence on the world’s largest consumer market as Beijing and Washington feud over trade. Some have moved production to Southeast Asia and other parts of the world to avoid U.S. tariffs on Chinese goods.
These trends appear to be accelerating under new President Donald Trump, who has threatened to sharply increase tariffs on all Chinese imports and close a number of loopholes that exporters currently use to sell their products more cheaply in the US. If implemented, his plans will likely raise prices in America. and putting pressure on sales and profit margins for Chinese exporters.
Chinese exporters are already looking at new markets
Du, speaking from her booth at the Yiwu wholesale market, where the walls are covered in colorful magnets and key rings, is unsure whether higher tariffs or a deteriorating U.S. market are to blame. What she knows is that sales are down.
“The U.S. market has shrunk tremendously,” she said. “It makes me feel like it has something to do with their financial situation.”
U.S. customers have put a lot of pressure on prices since 2019, frowning on any product sold wholesale for more than 25 cents, she said.
In contrast, the Middle East has become a better market, with higher prices and increasingly large orders, she said.
Elsewhere in the sprawling market, the owner of Yiwu Bixuan Import Export Co. reiterated. Ltd. her thoughts. Chen Yong’s trading company exports glass vases and other home decorations. According to Chen, business with the US and Europe has suffered in recent years, but business with other regions such as Southeast Asia, Africa, South America and Russia has boomed.
The share of Chinese exports going to the US fell from 19% in 2018 to 15% last year, according to Chinese customs data, even as total Chinese exports are expected to hit a record high this year.
Trump is talking about tariff increases of 60% or more. On Monday, he said that as one of his first executive orders, he would impose an additional 10% tariff on goods from China and a 25% tax on all products entering the country from Canada and Mexico.
Higher tariffs would force Chen to raise prices or accept lower profit margins, he said. If American customers don’t want to accept higher prices, the only choice would be to go elsewhere.
“We have to wait and see how much he will increase the rate before we know how big the impact could be on us,” he said. “We don’t know that now.”
An expert says ‘no one can tolerate a 60% tariff’
A 60% tariff would seriously affect Chinese exports to the US, said Tu Xinquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.
“Many companies will completely stop trading with the US,” he predicted. “If rates were not so high, larger companies would be able to handle the situation better than medium and small companies. But if it is 60%, no one can handle that.”
Light manufacturing and textiles are among the sectors expected to be hardest hit by new tariffs, along with steel and computers, according to a report by Chinese broker Caicong Securities.
During his first term, Trump imposed tariffs on more than $360 billion of Chinese products. The tariffs slowed a fairly steady increase in Chinese exports to the US. They first fell and then rebounded as the U.S. economy boomed, before leveling off at $500 billion last year.
The Biden administration retained most of Trump’s duties and introduced new duties on products such as steel, solar cells and electric vehicles. Biden’s approach focused on sectors considered strategic, such as artificial intelligence and green energy. Trump’s proposed blanket tariffs could spill over into everyday goods, putting pressure on smaller manufacturers like those in Yiwu.
Furniture, toys and games were among the top Chinese export categories to the US last year, after electronics and machinery, according to United Nations trade data.
Trump wants to end the exemption for shipments under $800
Trump has promised to close loopholes that allow Chinese goods to avoid US tariffs. One such loophole is an exemption that allows small packages under $800 to enter the US duty-free. Many of the products sold through Amazon’s third-party marketplace and on Chinese platforms Temu and Shein qualify for this exemption.
The Biden administration has proposed limiting tax exemptions for goods subject to US-China tariffs, and Trump is expected to move forward with such restrictions, analysts said.
“This would be a crushing blow to Chinese exporters who have built business models around these low-value exports,” said Eswar Prasad, a professor of trade policy at Cornell University and former head of the China division at the International Monetary Fund.
It would also be “a big loss for low-income American consumers,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, DC. “There are indications that they really benefit from the exemption.”
Some Chinese companies are moving their production abroad
One solution for Chinese companies is to move production abroad. Since Trump started a trade war with China during his first administration, average U.S. tariffs on Chinese goods have been about 20%, said Ma Hong, an economics professor at Tsinghua University in Beijing.
To avoid these tariffs, some Chinese companies have moved their factories to countries such as Vietnam and Mexico.
Shenzhen HIHO Luggage and Bag Industry Development Co., Ltd. opened a factory in Indonesia in 2021. The luggage maker employs about 600 workers in Indonesia and has a similar workforce in China, where it operates factories in three provinces.
According to marketing director Steven Wang, the company exports about a quarter of its production to the US. He believes some of the company’s customers in Mexico may also resell their products to the US
“No one likes to do business at a loss,” says Wang. “If Trump imposes additional tariffs on Chinese goods from ASEAN countries or Mexico, we may have to move the factories elsewhere.”
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Mistreanu reported from Taipei, Taiwan. Associated Press video producer Wayne Zhang in Yiwu and researcher Yu Bing in Beijing contributed to this report.
