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US business executive Kinukely came to Guangzhou’s 137th import and export fair this week.
“Now, that’s essential,” said New York head of product development. “There are no exceptions.”
Kelly’s enthusiasm for diversifying her supply chain is one of the attendees at China’s largest and oldest exhibition, the largest and oldest exhibition, after President Donald Trump raised taxes on most Chinese products to 145% this month.
Founded in 1957 by Mao Zedong to help communist countries overcome the US trade embargo, the annual Canton Fair has become China’s outstanding export show and serves as an important link between the country’s vast manufacturing hubs and enthusiastic clients around the world.
But Trump’s sudden new taxation, which China encountered with its own 125% tariff, is threatening to promote a decoupling between the two biggest economies of the world, far beyond what most exporters considered as the worst-case scenario before taking office.
In the halls of Canton Fair in Guangzhou, American buyers and Chinese producers were rushing to find new markets for goods and alternative trade routes to avoid tariffs, but the warehouse was filled with a pile of unwanted stocks that became new and affordable.
“The prices in large supermarkets are already very low. There’s no way to accept such high tariffs,” said Ren Chaoqun, product manager at XStrap.
Ren and other suppliers added that many of the products are tailored to specific American clients. This means finding customers in different markets can involve sudden regulatory hurdles and branding removal.
With few obvious solutions, Ren wanted both sides to meet and make a deal quickly. However, neither of them commits to the lecture timeline.
China’s warehouses have been filled with goods since Donald Trump announced new tariffs in China.
Many exporters of 1.6MN SQ M Fair said that the new taxation would make sales to the US market unfeasible.
“It’s definitely difficult,” said Shen Senjian, sales manager at Autoline, a Jiangsu-based manufacturer of electronics for recreational vehicles such as coffee makers, which won a third in the US.
“All US customers have suspended all orders. The tariffs are too high.”
“If they don’t talk about it, we’re not going to choose to just quit the US market,” Shen added. “We can find more customers in Europe or countries along the belt and roads (XI Jinping’s signature international inflynis initiative).”
Another option is to shift production from China.
Many Chinese exporters began expanding their operations overseas in 2018 after Trump imposed tariffs on the country during his first term. The Canton Fair booth raised flags from Vietnam, Thailand and other Southeast Asian countries to seduce US buyers who are wary of the costs of “made in China” labels.
Vera Li, sales specialist at Quanzhou Viition Gifts, is a manufacturer of plants in Cambodia and China’s coastal Fujian province, and said Trump’s obligations will accelerate plans to shift the balance of production to Southeast Asia.
Guangzhou’s Chinese Imports and Exports were founded by Mao Zedong in 1957 to help China overcome the US trade embargo. Today, it connects clients and manufacturers around the world ©ng Han Guan/AP
The company’s factory in Cambodia already had regular staff of about 1,000 workers, compared to the 800 people on the Fujian site, and planned to expand with two new factories. Fujian plants will gradually turn their focus into manufacturing, design and research, she said.
But Trump’s threat to almost all “mutual” tariffs of the US global trading partners he postponed for 90 days meant that even exporters with plants from abroad would not let out a sigh of relief.
“Mutual” taxation is based on trade balances, and countries with large US surplus such as low-cost manufacturers in Vietnam, Cambodia and Bangladesh could face a tax as high as 49%.
“We have not been affected up until now, but in the future we don’t know, you need to wait for the policy,” said Nancy Yi, sales manager at Flextech Co, a producer of solar panels and energy storage units in the US market, which has two factories in Central Hu Qiao Province, China and Vietnam. “At this point, the solution is not very clear.”
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Nevertheless, for companies with products that source products, Chinese companies operating plants in Southeast Asia could be the only option, said Sourcing’s John Chen.
“Our goal is to put our products outside of China and manufacture and deliver (IT),” he said. “That’s a priority.”
“The US is also tariffs in Vietnam, Cambodia, Thailand and Indonesia (if so),” Chen said. He added that Trump’s aim to urge businesses to bring manufacturing back to the US is “impossible.”
“There is no supply chain.”
