Caixin Weekly | Amid Tariff War Pressures, Chinese Manufacturers Rebuild a Resilient Ecosystem (AI Translation)

财新周刊｜关税战危墙之下 中国厂商重建高弹性生态

The article delves into the escalation and aftermath of the intense 2025 US-China trade war following Donald Trump's election as US president in November 2024. Unlike the 2018 trade disputes, the new trade conflict evolved rapidly with little advance notice, creating massive uncertainty and chaos among Chinese exporters and US importers. Key developments included a series of swift and dramatic tariff increases, culminating in near-total shutdowns of specific trade flows and the forced restructuring of supply chains.[para. 1][para. 2][para. 3][para. 4][para. 5]

Chinese exporters, many of whom had experienced or anticipated trade frictions from Trump’s previous term, were nonetheless unprepared for the speed and magnitude of the tariff increases. For example, initial expectations of 20–30% tariffs were dwarfed as rates surged from 10% in February to as high as 145% by early April. The sudden and repeated policy shifts left businesses scrambling to adjust strategies, often having to choose between absorbing losses, passing costs to customers, or suspending exports altogether. Everyday goods, like socks and electronics, rapidly lost competitiveness in the US market, and even essential low-margin sectors faced existential threats.[para. 1][para. 2][para. 3][para. 4][para. 5]

US actions included not just general tariffs but also targeted measures such as the cancellation of the $800 duty-free threshold for small parcels, which crippled cross-border e-commerce. China retaliated with escalating tariffs of its own, targeting US goods and introducing export controls on critical minerals. By early April, both sides had imposed tariffs exceeding 100% on each other’s products, paralyzing trade and creating chaotic rushes by exporters and importers to ship goods before new deadlines and rates took effect.[para. 3][para. 4][para. 5][para. 6][para. 7][para. 8]

This frenetic escalation forced companies to adopt extreme risk management tactics, such as “tariff floating clauses” where contract prices were indexed to prevailing customs rates, or migration of supply chains out of China. Factories began relocating to Southeast Asian countries like Cambodia or Vietnam, often under pressure from US clients, but such transitions were fraught with additional logistical, quality, and workforce challenges.[para. 7][para. 8][para. 9][para. 10]

For many, the unprecedented and unstable policy environment made long-term planning impossible. Several exporters and importers paused or canceled shipments, while some goods were stranded at ports or warehouses, incurring heavy storage costs or resulting in abandoned cargoes. Supply chain disruptions rippled across industries, with logistics companies reporting dramatic drops (15% or more) in US-bound shipments, and the excess costs ultimately translating into higher prices for American consumers—doubling in some cases.[para. 9][para. 10][para. 11][para. 12]

By mid-May, a joint US-China statement suspended 91% of the tariffs for a 90-day period, and shipments surged as companies raced to clear backlogs. However, the brief “truce” did little to restore confidence, as the threat of re-escalation loomed. Firms remained hesitant to ramp up production, wary of a repeat of the extreme volatility that had characterized the spring of 2025.[para. 12][para. 13][para. 14]

Going forward, both Chinese and American firms emphasized the need for stable, predictable policy rather than low tariff rates per se. Many supply chain restructurings, investments, and “going abroad” projects were placed on hold, and the overall trade volume remained subdued. Interviewees highlighted that despite attempts by the US to diversify away from China, no other market could match China’s scale or efficiency in the near term. Ultimately, continued economic interdependence makes outright “decoupling” both unlikely and mutually damaging.[para. 14][para. 15][para. 16][para. 17]

In summary, the 2025 US-China trade war demonstrated the devastating impact of unpredictable trade policies on businesses, with no clear winners and significant costs borne by producers and consumers on both sides. The consensus is that stable, rules-based trade relations are essential for global supply chain health and bilateral economic prosperity.[para. 17][para. 18]