Who Bears the Cost of U.S. Tariffs on China as Supply Chain Dynamics Intensify | Overseas Consumption (AI Translation)

美国向中国加税成本谁来担 供应链博弈加剧｜出海·消费

In early February 2025, President Trump signed an executive order to impose a 10% tariff on all Chinese goods exported to the United States, which would be effective from February 4. Furthermore, on February 27, he announced an additional 10% tariff effective March 4, with cumulative rates reaching 20% by 2025. [para. 1] The resulting increased costs will be subject to negotiations between Chinese exporters, U.S. importers, and end consumers, with each trying to shift the burden to the others. [para. 2] Hu Jie from Shanghai Jiao Tong University believed that bargaining power would determine who bears the burden, with the weaker party losing out. [para. 1][para. 2]

For the initial tariffs, Chinese exporters and U.S. importers are generally sharing the costs equally, but as the tariffs rise, Chinese exporters increasingly pass these costs onto U.S. importers due to challenges in absorbing them at current price levels. [para. 4] JINCHAN Curtains, for example, is managing the costs by passing some onto customers, with an anticipated retail price increase of 8-10%, which is anticipated to affect sales. [para. 5] Similarly, a small textile business agreed to share the cost with U.S. customers, though the sharing ratio is still under negotiation. [para. 5][para. 6]

Large players like Walmart are exerting pressure on Chinese suppliers to lower prices to absorb these costs, which presents a challenge for smaller suppliers whose margins barely cover the 20% tariffs. [para. 8] The Chinese Ministry of Commerce has addressed concerns regarding such price cut demands and is seeking clear communication and fair practices from organizations like Walmart. [para. 11]

Adding to the general tariffs on Chinese goods, additional duties under Section 232 were reinstated, with a 25% tariff on imported steel and aluminum products on March 12. [para. 12] As a result, tariffs on Chinese steel and aluminum have reached 45%, significantly increasing costs and reducing profitability in the industry. [para. 13] The aluminum industry heavily relies on exports to the U.S., which remains the largest market for these products, illustrating the importance of integrating into international markets amid heightened tariffs and international trade tension. [para. 15][para. 16]

The U.S. is China's largest trading partner, with exports to the U.S. contributing significantly to China's overall trade values. Labor-intensive products such as clothing and furniture have experienced significant declines in export values due to the tariff impositions, posing intensified pressures amid U.S.-China trade tensions. [para. 17] U.S. importers are exploring alternative sources, under a "China +1" strategy. This strategy diversifies their supply chains and reduces reliance on China in anticipation of potential further tariffs. [para. 20][para. 21]

On a broader scale, Chinese companies face challenges navigating these tariffs. Moving the supply chain or improving production efficiencies serves as possible mitigation strategies, although not without significant hurdles. [para. 30] Furthermore, the sheer scale of the U.S. market makes it unrealistic for some companies to consider exiting. [para. 33] Enhancing innovation and upgrading industrial capabilities are viewed as critical long-term solutions to mitigate the impact of current and potential future U.S. tariffs. [para. 37]