A Chinese furniture manufacturer, Jin Chaofeng, opened a factory in Vietnam in July last year to avoid higher US tariffs. Now, it plans to close the factory as Washington has imposed high tariffs on Vietnam and the rest of the world.
“I have made all the work in vain” Jin said to Reuters, adding that the foreign trade would become a business with a “very low profit margin” just like the Chinese market.
No other country comes close to China’s annual sales of over $400 billion worth of goods to the United States. President Donald Trump has just increased the tariffs on these goods by an additional 34 percentage points as part of his comprehensive retaliatory tariffs.
The widespread tariffs will likely deal a lasting blow to the global demand. China is more exposed to the risk of a shrinking global trade than any other country, as its economic growth in the past year was heavily reliant on a trade surplus of over $1 billion.
It is expected that the new tariffs will reduce China’s exports to the US by 30 percent, cut its total exports by more than 4.5 percent and slow down its economic growth by 1.3 percentage points.
Before Trump’s re-election in November, many Chinese manufacturers had relocated some of their production facilities to Southeast Asia and other regions.
Now, their new factories in Vietnam, Thailand and elsewhere are confronted with tariffs of 46, 36 and at least 10 percent, respectively.
When Trump increased the tariffs on China by 20 percentage points in February and March, Chinese manufacturers were in a race to find new export markets in Asia, Latin America and elsewhere.
The new import tariffs will take effect on April 9 and the exceptions for small imports worth less than $800, which mostly benefited Chinese low-cost retailers like Temu and Shein, will be abolished from May 1. In the past, China had immediately announced its countermeasures upon the implementation of the tariffs.
Analysts believe that the new measures by Washington are a kind of tit-for-tat with Beijing, which could put China’s economic growth and its efforts to combat deflation out of commission. “This will make it impossible to achieve the growth target of 5 percent” said Zhiwu Chen, a professor of finance at the HKU Business School.
According to a study by the investment bank Jefferies, around 145 countries will trade more with China than with the United States in 2023, which represents a nearly 50 percent increase from 2008.
This is a measure of China’s decades-long success in developing competitive industries under the framework of the global trade order created by the United States, which now considers China as unfair and a threat to its own security.