US-China Trade Deal Sparks Rush of Activity in Chinese Factories and Ports
A surprising breakthrough in the US-China trade tensions has triggered a flood of activities in Chinese factories and ports as American and Chinese companies hurry to take advantage of a 90-day rollback from heavy tariffs announced at the beginning of the week.
Increased Orders and Production
For Niki Ye, a seller in South China who sells toys on Amazon, the announcement of a 30% increase in orders has led her company to have a lineup for demand. "And that’s only in the first week," she said. Liu Changhai, sales manager of an export-oriented agency in East China, which specializes in house facilities, said that sales now correspond to those during a typical high season, but there would be a delay in sending goods.
Shipping and Logistics
The new orders have not yet been manufactured and are not ready for shipping. In the meantime, ports are about to displace an inventory that was sent to the inventory during the weeks. The bookings for China shipping containers to the USA have grown almost 300% in the seven days compared to the week that ended on May 5, according to container tracking software provider Vizion.
Trade Agreement Details
The deal that came into force brings US tariffs on Chinese imports into the country to 30%, without existing measures that were imposed during the first term. China’s tariffs for all US imports that were applied last month have dropped from 125% in most US imports to 10% – although previous tariffs for selected goods also exist.
Company Reactions
Companies are scrambling to navigate this rush. Ben Schwall, whose company helps businesses with product sourcing and advises them on China and Asia strategies, says he spent the week answering questions from clients. Some of them had heard the news while in the middle of diverting supply chains and production from China to other Asian countries to avoid the tariffs.
Shipping Companies Notice Increase
Shipping companies are already noticing the climb. The Danish shipper Maersk, which saw a volume in China and US Ocean decrease by 30% to 40% at the end of April, is now increasing capacity on its transpacific services after seeing a surge in bookings following the agreement.
Uncertainty and Future Plans
The crazy scramble to restart, start, or send orders from China is all the more complex for companies, given the uncertainties not only about where US-China tariffs will ultimately end up but also about US obligations in other countries in the region. Trump announced a slew of so-called retaliatory tariffs on countries around the world last month, including high taxes for goods from Southeast Asian countries such as Vietnam and Cambodia.
Adapting to Change
Mazza, who heads the lighting business in Connecticut, said that he had examined moving some production from China to Vietnam, where the furnishing process will probably take about a year and the production would finally cost around 10% to 15% more per unit than in China. But he said he was not ready to give up China, citing a long-standing relationship with his China factories.
Finding New Markets
Tong, whose factory makes remote-controlled cars, says that she is not worried about finding out whether the tariffs continue, climb, or fall after the 90-day break. "We are also working hard to expand other new markets … Especially in Europe, where our orders rose by almost 20%," she said, adding that the sales will start, "we have to expand."
