The escalating trade war between the United States and China has reached a new level, with both sides imposing multiple rounds of tariff increases. Currently, the tariffs imposed by the United States and China stand at 145% and 125% respectively. While the Chinese authorities are retaliating against the United States, they claim to strengthen the domestic cycle and prioritize expanding domestic demand as a long-term strategy. However, some business owners have bluntly stated, “The survival of businesses relies on overseas orders, and the more we focus on domestic demand, the more losses we incur.”
Amid the intensification of the US-China trade war, Chinese Premier Li Keqiang hosted an economic situation expert and entrepreneur symposium on the afternoon of April 9, emphasizing the importance of boosting the domestic cycle and expanding domestic demand as a long-term strategy.
Over the past two years, China’s economy has been consistently facing a downturn, with consumer spending decreasing and domestic demand remaining sluggish as a well-known fact. The impact of the ongoing US-China trade war on the Chinese industry has been a cause for concern.
In a video posted online, an entrepreneur with the username “Dinghong Ice and Snow Sports General Manager” discussed the impact of the US-China trade war on Chinese private enterprises with two other business owners. According to the General Manager, US customers are demanding that he move his factory overseas. As a result, he has begun preparations in Vietnam, as Vietnam has already initiated negotiations with the US and is willing to offer zero tariffs. He believes that Vietnam will find ways to lower tariffs and attract business. “If we have a factory in Vietnam, several major brands will shift their orders to us.”
The General Manager pointed out that currently, major ski brands are predominantly from the United States, making it challenging for Chinese ski brands to compete. Unlike other countries, China’s retaliatory tariffs against the United States have led to adverse consequences, putting Chinese enterprises in a difficult position. He expressed concerns that in this tit-for-tat situation, “private enterprises, especially foreign trade-oriented enterprises,” are facing hardships.
He highlighted that even enterprises focused on the domestic market are affected, as many domestic businesses, such as those producing paper boxes, rely on foreign trade enterprises. “In reality, many domestic orders are driven by foreign trade orders.”
He urged the government not to rush into countermeasures against the US and not to retaliate too quickly since China’s export economy still plays a significant role.
In recent years, the Chinese government has emphasized using domestic demand to drive the economy. However, the General Manager pointed out that in China, the more emphasis placed on domestic sales, the more losses incurred. “We are already facing overproduction issues in China. The more we focus on domestic sales, the more losses we sustain; many businesses are operating at deficits, so don’t be fooled by appearances of robustness.”
He revealed that while he manages to keep four or five factories afloat, it’s because of foreign trade orders. However, if he were to rely solely on domestic orders, it would result in losses. “Even with extensive domestic sales, all that would lead to is losses from domestic orders.”
He predicted that many domestic enterprises might face closures this year, stating, “You can already see many companies struggling by the year-end.”
He noted that hiring has become more comfortable, and factory rental prices have dropped significantly. “I used to rent at 21 yuan per square meter, but now, I can get the same space for less than 10 yuan; it’s more than a fifty percent drop.”
On April 9, several industry insiders mentioned in videos that the outcome of the US-China trade war would force Chinese foreign trade factories to switch to domestic sales, leading to collective struggles within the country.
A financial blogger from Nanjing stated in a video, “Many foreign trade factories will undoubtedly reduce production capacity, leading to layoffs, and a large number of people may become unemployed. If these foreign trade factories want to survive, they will have to switch to domestic sales. Will the domestic factories then face the same issue again? The consequence will be a collective struggle. Don’t expect the domestic market to absorb this surplus capacity.”
A factory worker from Dongguan expressed that the biggest losers in the tariff war are likely to be the factories in Dongguan, emphasizing that foreign trade factories are inevitably shifting toward domestic sales, which will lead to collective struggles within the country.