Chinese manufacturers say they will speed up efforts to move production to other countries to circumvent US tariffs, after President Donald Trump announced a new trade offensive against the world\u2019s second-largest economy.<\/p>\n
Beijing is considering how to retaliate against Trump\u2019s decision on Saturday<\/a> to impose an additional 10 per cent tariff on Chinese exporters, with options ranging from counter-tariffs to export controls and currency depreciation.<\/p>\n The relatively muted initial response from the Chinese government, combined with Trump\u2019s truce with Canada and Mexico<\/a> on Monday and his plans for a call with China\u2019s President Xi Jinping in the coming days, have fuelled hopes in Beijing that there may be room for negotiation.<\/p>\n But with the tariff set to take effect on Tuesday, companies in China\u2019s southern manufacturing heartlands said their strategies included moving some production to locations including the Middle East, passing the cost to US customers and seeking alternative markets.<\/p>\n \u201cA lot of Chinese exporters, especially in the consumer products market, had already lost part of their US market over the past few years after tariffs kicked in,\u201d said Michael Lu, president of China-based gift box producer Brothersbox, referring to levies Trump imposed as part of a trade war during his first term in office.<\/p>\n Lu said Brothersbox planned to move part of its production to the United Arab Emirates this year to target the US market. \u201cWe hope to win them back,\u201d he said of his US customers.<\/p>\n <\/picture><\/a><\/figure>\n<\/div>\n Trump<\/a>\u2019s threat of an additional 10 per cent tariff on Chinese goods \u2014 which he attributed to Beijing\u2019s alleged inaction on fentanyl exports to the US \u2014 was raised during his election campaign.<\/p>\n But Chinese companies have already been diversifying their trade in recent years. The country\u2019s direct share of US imports fell eight percentage points between 2017 and 2023, according to a report by Rhodium Group last year.<\/p>\n Some Chinese production has moved to third countries, from where it is exported to the US. The share of US imports from Vietnam and Mexico, for example, increased substantially during the same period.<\/p>\n Lynn Song, greater China chief economist at ING, said the tariff would have a limited effect because \u201ca lot of the price-sensitive exports to the US have already been redirected as a result of the first trade war\u201d.<\/p>\n With Trump targeting Mexico, Chinese companies would probably shift more trade towards south-east Asia and Latin America, he said.<\/p>\n More sophisticated Chinese exports, such as machine parts, would also be difficult to substitute, meaning US buyers would have to absorb the price increases.<\/p>\n Tony Cao of Foshan Nanhai Yingya Hardware Products, a company in China\u2019s southern Guangdong province that makes about 5 per cent of its sales in the US, said Trump\u2019s tariffs would hit American importers harder than Chinese producers.<\/p>\n \u201cThey need to buy Chinese products,\u201d Cao said. \u201cTheir procurement costs will increase and therefore their sales prices will rise correspondingly.\u201d<\/p>\n Some analysts said the speed of the tariff\u2019s promised implementation posed a challenge for Beijing, and questioned how much more Chinese manufacturing capacity could be easily moved abroad.<\/p>\n \u201cAnybody who could [move supply chains] already has,\u201d said Cameron Johnson, a partner at consultancy Tidalwave Solutions. Countries such as Vietnam<\/a>, where Chinese companies have set up production lines, could also be hit by tariffs, he said.<\/p>\n \u201cAnyone who has a significant trade surplus with the US is going to get some form of tariff,\u201d Johnson said.<\/p>\n Amy Lin, a sales manager at Chinese footwear manufacturer Teshuailong, said overseas investment required more capital and manpower than her company could muster. Instead, Teshuailong would seek new customers in markets such as the Middle East. \u201cLife goes on,\u201d Lin said.<\/p>\n Beijing criticised Trump\u2019s new tariffs and threatened to file a lawsuit<\/a> to the World Trade Organization, but has yet to announce retaliation.<\/p>\n Analysts pointed to options such as export controls on rare earths \u2014 which are essential to the new energy industry \u2014 or antitrust investigations such as one recently announced<\/a> against US chip company Nvidia.<\/p>\n Tidalwave\u2019s Johnson said other measures could include further controls on exports of drones and electric vehicle parts to the US.<\/p>\n Most analysts believe Washington will impose more tariffs, particularly after the conclusion in April of an investigation Trump has ordered into the 2019 trade deal with Beijing during his first administration.<\/p>\n While China\u2019s imports of US agricultural products increased slightly following that deal, its purchases of American manufactured goods decreased in 2020 and 2021 as the pandemic wreaked havoc on global supply chains.<\/p>\n In the meantime, some analysts believe China\u2019s best strategy is to quietly cut its own imports of targeted US products, such as aircraft, agricultural products and medical devices. <\/p>\n This could hurt the constituencies of powerful Republican politicians or industry groups, such as farmers and the oil and gas sector, while waiting for a chance to negotiate a new deal.<\/p>\n \u201cWe don\u2019t discount the possibility of reciprocal tariffs coming [from China], but we think they\u2019re going to be done quietly,\u201d said Chris Beddor, Gavekal\u2019s deputy China research director, to avoid drawing the president\u2019s attention away from Canada and Mexico, and possibly the EU.<\/p>\n \u201cTrump is clearly still open to a deal at some point,\u201d Beddor added, pointing to his postponement of a ban<\/a> on TikTok, the Chinese-controlled short-video platform, and a call last month with Xi. <\/p>\n Economists said Trump\u2019s policies could ultimately strengthen China\u2019s economy by forcing Beijing to concentrate on difficult structural reforms, such as directing more resources towards households rather than infrastructure and industry.<\/p>\n![\"Workers](\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fd1e00ek4ebabms.cloudfront.net%2Fproduction%2Facebf850-36de-4769-8130-88632bfe4382.jpg?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1\")
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