YIWU, China — Tourists who have recently picked up fridge magnets in popular spots like Times Square or other locations in New York City may be unknowingly supporting the craftsmanship of Du Jing and various other exporters from a small city in China known for its vast supply of small goods. Du Jing, along with her husband, manages Yiwu Xianchuang Handicraft Manufacturing situated in Yiwu, which houses the largest wholesale market in the world. This market produces a wide range of products, from plush toys and glass vases to portable toolboxes, many of which are available in stores and on online sites such as Amazon for consumers in the U.S. and beyond.
Historically, the United States has been a primary market for Chinese goods, but recently, exporters in Yiwu have begun to diversify their markets in light of the ongoing trade tensions between Beijing and Washington. Some have relocated manufacturing operations to Southeast Asia and other global regions in an attempt to avoid U.S. tariffs on products imported from China. Under the potential leadership of President-elect Donald Trump, there are concerns that tariff rates could increase significantly, making it more challenging for exporters to maintain their presence in the U.S. market.
Du Jing, standing at her booth adorned with colorful magnets and keychains, noted a decline in sales and mentioned that she couldn’t pinpoint whether higher tariffs or a downturn in the U.S. economy was more responsible. “The U.S. market has shrunk a lot,” she reflected. “It gives me the feeling that it has something to do with their financial situation.” She added that American consumers have become increasingly price-sensitive, being reluctant to purchase items wholesale that exceed 25 cents. Conversely, she reported a surge in demand from the Middle East, where both order sizes and pricing have improved.
Similarly, Chen Yong, the owner of Yiwu Bixuan Import Export Co. Ltd., shared his experiences at the bustling wholesale market, noting that his business focused on exporting home decor items like glass vases has struggled to gain traction with U.S. and European markets. However, he pointed out that trade with other regions, including Southeast Asia, Africa, South America, and Russia, has been thriving. The proportion of China’s exports directed toward the U.S. saw a slight decline, decreasing from 19% in 2018 to 15% last year, as the overall exports from China continue to climb toward record levels.
Trump has previously suggested steep tariff hikes, with possibilities reaching 60% or higher. Recently, he announced plans for a 10% additional tariff on goods from China and a 25% duty on products coming from Canada and Mexico, likely to be among his first executive actions. Chen expressed concerns that elevated tariffs would force him to either raise prices or accept thinner profit margins. He noted that if American consumers resist paying more, he may need to seek alternative markets. “We have to wait and see how much he will increase the tariff before knowing how big the impact on us can be,” Chen commented.
Experts have weighed in on the potential repercussions of extreme tariffs. Tu Xinquan, an expert at the China Institute for WTO Studies, projected that a 60% tariff could devastate trade with the U.S., prompting many companies to cease exports altogether, particularly affecting smaller businesses. According to a report by Chinese brokerage Caicong Securities, sectors such as light manufacturing, textiles, steel, and electronics could face the brunt of these new tariffs. During his previous term, Trump had imposed tariffs affecting over $360 billion in Chinese products, drastically impacting trade and stabilization in Chinese exports to the U.S.
The Biden administration has largely upheld existing tariffs while adding new duties on select products, focusing on strategic industries. However, Trump’s anticipated blanket tariffs could extend their reach to everyday consumer goods, presenting challenges for smaller manufacturers located in Yiwu. Categories such as furniture, toys, and games were noted as top exports from China to the U.S. last year, following electronics and machinery according to United Nations trade data.
As Trump has also committed to closing loopholes that currently allow small packages valued under $800 to enter the U.S. without tariffs, this could have significant ramifications for Chinese exporters who rely on such exemptions in their business models. Analysts predict this could deal a substantial blow to these exporters while adversely affecting low-income American consumers who benefit from these lower costs.
In reaction to trade disputes, some Chinese businesses have opted to shift their production operations abroad. Since the initiation of the trade conflict, tariffs on Chinese products have hovered around 20%. To circumvent these financial barriers, businesses have begun relocating factories to nations such as Vietnam and Mexico to maintain competitive pricing. For instance, Shenzhen HIHO Luggage and Bag Industry Development Co., Ltd. has established a factory in Indonesia, employing around 600 workers there in addition to their operations across three provinces in China. The company exports roughly 25% of its production to the American market. The marketing director, Steven Wang, indicated that further tariff increases might lead the company to reassess its manufacturing locations.
Wang stated, “No one likes to do business at a loss. If Trump impels any additional tariffs on Chinese goods coming from ASEAN countries or Mexico, we may need to relocate our factories again.”