Trade war: Chinese exporters’ front-loading beats US tariffs – but for how long?
- As manufacturers operate flat-out to fulfil US orders brought forward to avoid tariffs, the possibility of a sharp fall in demand in 2019 looms large
- Some are speeding up relocation of factories to other countries in Southeast Asia, where costs are lower and US tariffs do not apply
Guangzhou Seagull Kitchen and Bath Products, which relies on the US market for over a third of its revenues, has been running its production lines in China around the clock for the past three months, according to its workers.
Uniformed employees outside its factory compound said they were working 12-hour shifts to expedite orders for early next year, making sure their tap handles arrive in the United States ahead of a scheduled tariff increase.
The bathroom fixtures Seagull makes are on the list of US$200 billion worth of Chinese products on which the US imposed a 10 per cent duty starting on September 24, and which is set to rise to 25 per cent on January 1 if Beijing does not make trade concessions.
“Many of us have to work rotating [12-hour] shifts from 8pm to 8am or 8am to 8pm each day,” said a migrant worker in his forties, who declined to be named. He and his colleagues were having a late lunch, costing 12 yuan (US$1.70) each, in a small restaurant outside the factory on the outskirts of Guangzhou, the capital of south China’s Guangdong province.
Analysts have said the practice by Chinese exporters of accelerating production and shipment now to avoid the upcoming tariff increase – or “front-loading” orders – is one probable reason behind China’s strong export performance since Washington started to levy its first round of tariffs on Chinese imports in early July.
The practice may be widespread, because Chinese exports of chemicals, non-ferrous metals, plastics and special industrial machinery were the fastest-growing Chinese export categories in September, according to Chinese customs data, despite all of them being included on US tariff lists.