Chinese exporters in the US should be cautious as tariff uncertainty lingers

Deng Jinling, the manager of a Chinese thermos flask company exporting to the U.S. popped a bottle with her husband when she heard that Washington had reduced punitive tariffs against China for at least ninety days.

Deng, who celebrated the 90-day reprieve by blowing bubbles, is worried about what could happen after that. She has sent her daughter, aged 20, to the U.S. in order to scout out a warehouse to minimize risks and protect against further tariff fallout.

Deng, Lucky Bird Trade's manager, said that he was concerned Trump would forget what he had said today. The company is located in Yiwu, which is the largest wholesale center for small manufactured goods.

Chinese factories are heavily reliant on the U.S. marketplace, but they have buckled down, unsure of how to navigate a trade war that is becoming increasingly unpredictable and has threatened global supply chains. This uncertainty persists, despite a temporary truce.

After discussions with Chinese officials, U.S. announced on Monday that the two sides have agreed to a 90 day pause during which Washington will reduce tariffs on Chinese imported goods to 30% from 145%. Chinese duties on U.S. imported goods will also drop to 10% from 125%.

Despite the positive news, some manufacturers are still cautious, given that it is uncertain what will happen in 90 days. Some of them continue to look for overseas opportunities as a way to hedge their bets.

Christian Gassner is the General Manager of Limoss in Malaysia, a German manufacturer based in Dongguan in China, which manufactures control panels and remotes. He says that he will keep doing so, despite the tariffs pause.

"Even after the 90-day break, it still feels like someone hit the snooze on a fire alert. "Tariffs, politics and policy mood swings do not exactly scream stable business environment," he said.

Sticking to one area is like building a house on a trampoline. The U.S. market is one of the top three markets for Limoss. So, crossing our fingers before the next plot-twist isn't an option. We need real options fast.

Candice Li is the marketing manager for a medical device maker in Guangdong province, China. Her first reaction was to be suspicious and wonder if 30% would soon become 60%.

Li, in a reference to Trump, said: "As a president of a nation, he speaks as easily as if he were telling a joke. This threatens his credibility."

Li's company had stopped dealing with U.S. customers for over a month. She now expects clients to resume trading and pay the tariffs.

Her company has reduced its work hours and shifts as a result of the 145% tariff increase.

Li explained that "people from the supporting departments worked only half of each month, which is equivalent to a paycut."

Year-end Holidays in Focus

For some Chinese manufacturers, timing is crucial. In May, U.S. retailers place orders for the year-end holidays like Halloween, Thanksgiving, and Christmas.

Jessica Guo manages a Christmas Tree factory in Jinhua, eastern China. She said that she was scrambling for orders to be sent out.

We can't make enough Christmas trees to meet the demand of American clients. We are only able to schedule orders up until the end August. By then, however, the relationship between China and the U.S. may be uncertain.

Analysts say that customers will use the 90-day window to send as many goods into the United States as possible, but the outlook is uncertain beyond this period.

The container shipping industry expressed its appreciation for the agreement reached between Washington and Beijing on Monday, stating that it expects the deal to increase bookings.

The U.S. China agreement offers opportunities to some smaller exporters who have businesses in emerging markets.

Eileen Xiong is the sales director of Dongguan Vdette Information Tech Co., an air-purifier manufacturer. She said that many Chinese exporters focusing their attention on the U.S. had suspended deals in the last month due to the trade war. This had increased competition in emerging markets, where she operates, like India, and forced her to lower the prices.

"We're a small business... Big brands will not give up on the U.S. Market. They began to focus on markets that were cheaper or emerging. They may now, in a better climate, turn their attention to the U.S. and leave us less under pressure," said Xiong.

(source: Reuters)