When President Trump put new tariffs on goods from China this week to 125%, moods in dusty streets and small factories in southeastern China were a mixture of anger, worry and solutions.
Thousands of small, export-oriented factories in or near Guangzhou, a commercial hub in southeastern China, have played a central role in the country's rapid economic development for the past half century. To provide a rapid, low-cost supply of almost all manufactured products, they employ millions of migrant workers from across China.
Today, many of these small factories, the cornerstones of China's economy, face difficult times. Clothing factory managers are saddened by losses when a string of orders from American customers are cancelled at the last minute. Factory managers who make machines wonder whether their low cost will help them survive. And workers hope to still be at work in the coming weeks and months.
Several garment factories that primarily supply the US market have already been temporarily closed as owners wait to make tariffs clearer. More factory managers are rushing to find buyers in other countries or drive away customers in China.
But China was already facing a massive amount of factory capabilities, even before Trump began closing the US market to many imports from China this year. Other customers are demanding deeper discounts.
Catastrophic low prices for manufacturers are especially common in the Chinese domestic market. Many Chinese consumers are now extremely frugal after losing their lives savings in the country's housing market conflict.
“The trade war has a big impact, because if we can't export, we'll have fewer orders of clothing and we have nothing to do,” said Ling Meilan, co-owner of the shirt factory on the second floor of a concrete building in the vast Warren of a low industrial building. Workers were covered on a sewing machine with a long table under fluorescent lights.
Lin focuses on the domestic market in China. However, some nearby factories that are primarily sold to the United States have already been temporarily suspended.
The street factory manager who gave only Yao with her last name said that she mainly supplied Amazon and had already seen the slowing down orders. “If the US tariffs are too high, we can't do that. I will definitely switch to another market,” she said.
At a small factory in Guangzhou, canceling recent clothing orders has been particularly difficult. American importers often pay half of the cost of clothing upfront, and the rest later.
Last-minute cancellations without compensation by importers who don't want to pay Trump's tariffs have left some factories stuck on them with a fair inventory of everything from clothing to handbags, factory managers said. The 50% down payment they received is not sufficient to cover their costs.
Machine manufacturers may be slightly better at withstanding customs duties. China has a great influence on some categories, so there are few rivals in other countries.
Elon Lee, who owns a small Guangzhou factory that manufactures low-cost cooking utensils for restaurants and backyard barbecures, said he didn't worry about the latest American rates as all his competitors are in or near Guangzhou.
Japanese, Korean and European manufacturers make equipment for the same task, but they use much more expensive materials to charge up to 10 times as much as he does. factories in Southeast Asia and Africa could not compete as China alone produce low-cost electrical components, he said.
His biggest cost, Steel, said he was much cheaper in China than elsewhere, and he said he changed his English name from Dragon to Elon after reading a book about Elon Musk in 2020. The meltdown in the Chinese real estate market has destroyed China's construction, leaving a massive amount of steel.
Retail prices for cookware in the US cost up to eight times more than what it costs in China, Li said. Tariffs are primarily calculated based on very low manufacturing costs before being marked up sharply in the US. So, even the massive tariffs, Trump has added a 125% tariff on Chinese products within three months, but manufacturing costs are just a small fraction of the final price, so it may not be that much to raise retail prices.
One of the undecreasing costs is labor. All managers at five factories in Guangzhou said they had not seen the signature in recent weeks when workers accept lower wages. Decades of Chinese birth rates have led to a nationwide shortage of factory workers, especially among young people.
Decades of nearly continuous economic growth in China leave many manufacturers with enduring beliefs that they overcome the latest challenges.
“Our country is really strong,” Lynn said. “Personally, I'm very pleased and have great confidence in China.”
You contributed to your research.
