Chinese manufacturers are intensifying efforts to shift production abroad in a bid to circumvent new tariffs imposed by US President Donald Trump. This move follows Trump’s recent announcement that an additional 10 percent tariff would be levied on Chinese exports starting Tuesday. As Beijing explores retaliation strategies, including counter-tariffs, export controls, and possible currency depreciation, manufacturers in China are adapting to the new trade climate.
While the Chinese government’s initial response has been somewhat subdued, the country’s leaders remain cautiously optimistic about potential negotiations, especially after Trump’s recent truce with Canada and Mexico and his planned call with China’s President Xi Jinping. However, Chinese companies in the southern manufacturing regions are already devising plans to navigate the impact of the tariffs. Strategies include moving production to countries in the Middle East, passing the cost onto US consumers, and targeting alternative markets.
According to Michael Lu, president of China-based gift box producer Brothersbox, many Chinese exporters have already lost part of their US market due to tariffs from Trump’s previous trade war. As a result, the company plans to relocate part of its production to the United Arab Emirates to regain market share in the US. “We hope to win them back,” said Lu, speaking about his US customers.
The trend of diversifying trade routes has been ongoing for some time. A report from Rhodium Group cited by the Financial Times highlights that between 2017 and 2023, China’s share of US imports fell by eight percentage points. During this period, countries such as Vietnam and Mexico saw a rise in their exports to the US as Chinese companies shifted production abroad.
Lynn Song, Greater China Chief Economist at ING, noted that the impact of Trump’s new tariffs may be limited, as many price-sensitive exports to the US have already been redirected during the first trade war. Song speculated that Chinese businesses would focus more on Southeast Asia and Latin America, especially as Trump targets Mexico with tariffs. Yet, more complex Chinese exports, such as machine parts, would be harder to replace, forcing US buyers to absorb price hikes.
Tony Cao of Foshan Nanhai Yingya Hardware Products, which exports about 5 percent of its goods to the US, believes that the tariffs would hurt American importers more than Chinese producers. “They need to buy Chinese products,” Cao stated. “Their procurement costs will increase and therefore their sales prices will rise correspondingly.”
Some analysts, including Cameron Johnson from Tidalwave Solutions, expressed scepticism about how quickly Chinese companies could relocate their manufacturing capacity. Johnson pointed out that many businesses that could have moved their supply chains already did so, and countries like Vietnam could also face tariff pressure in the near future.
For smaller companies like Teshuailong, a Chinese footwear manufacturer, the focus will not be on relocating but instead on securing new customers in markets such as the Middle East. Sales manager Amy Lin said that overseas investment required too much capital and manpower for her company to handle. “Life goes on,” Lin said.
China’s government has criticised Trump’s tariffs and hinted at the possibility of a lawsuit through the World Trade Organisation. Retaliation options include export controls on rare earths and antitrust investigations into US companies like Nvidia. Analysts believe that China may strategically reduce imports of specific US goods, like agricultural products and aircraft, to target key constituencies in the US.
