Amid President Trump’s significant increase in tariffs on Chinese goods, China’s manufacturing sector is facing rapid loss of export orders, leading to a large number of factories suspending production. Experts point out that as the impact of tariffs deepens, the Chinese manufacturing industry is facing a comprehensive shock, with some industry insiders believing that the impact of this blow may even surpass that of the COVID-19 pandemic.
In important export hubs in China such as Yiwu and Dongguan, many factories have temporarily laid off half of their employees and halted production for several weeks, particularly impacting factories producing toys, sports goods, and low-cost consumer products.
Cameron Johnson, a senior partner at Shanghai consulting firm Tidalwave Solutions, told CNBC, “I know of several factories that have told half of their employees to go home and rest for a few weeks, while also halting most of their production.”
He said that the industries currently most affected include manufacturers of toys, sports goods, and low-cost retail items.
“While the scale has not yet expanded, this situation is occurring in major (export) hubs like Yiwu and Dongguan, and what is worrying is that it may expand in the future,” Johnson said. “Everyone hopes that tariffs will be reduced to allow orders to recover, but in the meantime, companies have started to give employees time off and halt some production lines.”
According to estimates by Goldman Sachs, currently around 10 to 20 million Chinese workers are engaged in businesses related to exports to the United States, while the total urban employment population in Chinese cities in 2024 was approximately 473 million.
Meanwhile, according to the Financial Times, with Trump’s tariff policies taking effect, the volume of 20-foot standard containers (TEUs) on China-US routes saw a significant 45% decrease in mid-April compared to the same period last year. The Port of Los Angeles expects a one-third decrease in incoming cargo volume from the same period last year starting in May, with air cargo demand also declining simultaneously.
Facing a sharp decline in export orders, many Chinese manufacturers are beginning to shift their focus to the domestic market. However, they are still unable to compensate for the lost orders and are forced to reduce production for several months.
Woodswool, a sportswear manufacturer based in Ningbo, stated that they are trying to open live streaming on Baidu’s e-commerce platform to fill the void left by overseas orders. Despite these efforts, the challenge of making up for lost overseas orders remains daunting, with some production capacity remaining idle for two to three months until the company can expand into new markets.
Last week, the New York Post also reported that dozens of garment factories in “Shein Village” in the Panyu District of Guangzhou have ceased operations. Due to the cancellation of the U.S. “de minimis” policy for parcels under $800, along with the impact of new tariffs, many factories supplying Shein have been unable to relocate their production lines and have had no choice but to shut down.
Shein suggested that some financially capable suppliers consider moving production to Vietnam, but more small-scale businesses have had to exit the market.
Ash Monga, founder of the supply chain management company Imex Sourcing Services, stated that the recent impact of tariffs is “much greater than” that of the COVID-19 pandemic.
He pointed out that for small businesses with only a few million dollars in resources, a sudden increase in tariffs may be unbearable and could even lead to bankruptcy.
Last Friday, Michael Hart, Chairman of the China-U.S. Chamber of Commerce, stated, “Some companies have told us that under a 125% tariff, their business models cannot operate.”
He also noted that competition among Chinese companies has become fiercer within the past week.
Some exporters are also trying to expand into markets in Asia, Europe, and Latin America. However, with the emergence of cheap Chinese goods, deflationary trends could spread to other markets, intensify competition, and potentially lead to widespread price reductions. This may compel other countries to increase trade barriers against Chinese goods.