Chinese exporters breathe sigh of relief on tariff truce but do not expect a quick end to US trade war
- Export manufacturers are under no illusions about relations with the US
- Some firms say 25 per cent tariffs would kill off their businesses
Struggling exporters in China’s Pearl River Delta and Yangtze River Delta manufacturing regions believe the trade war between the US and China will not end easily or soon, but they welcomed the tariff truce – however brief – announced on Saturday.
Many export manufacturers remain trapped, facing the difficult choice of either shifting large parts of their production capacity out of China to avoid the US tariffs or doing nothing and watch as orders from their US clients dry up.
Most of the businessmen contacted by the South China Morning Post know the truce is temporary. In contrast, Chinese state media have painted the frozen tariff rate as a victory for President Xi Jinping, but neglected to mention the 90-day limit.
Under the deal, the US agreed to delay a rise in tariff rates on $200 billion worth of Chinese imports from 10 per cent to 25 per cent to permit further negotiations that might address US concerns about Chinese business practices. The US could still raise the tariff rate if there is no deal on the complicated US complaints at the end of the 90-day period, which will begin on January 1.
The trade truce “is really a good news for our export business to the USA, as a 25 per cent tariff would be a kill shot to all of us”, said Steve Xie, who runs a trading company in Haining, Zhejiang province exporting sofa fabrics. “To be honest, we have been very anxious and confused in the past a few months” about the outlook for the business.
“We talked a lot about the possibility of relocating our factories to other countries in Southeast Asia because a 10 per cent tariff is a blow that we are able to absorb, but 25 per cent would be the death of our export market in the US,” he said.
“According to what I know, many of manufacturers in the Yangtze River Delta will definitely delay their plans to relocate, especially small and medium-sized firms, because manufacturing costs have also been soaring in Vietnam, and it costs a great deal to build a new factory there for small Chinese firms,” Xie said.