Under the fierce trade war, China’s foreign trade industry is suffering greatly as profits shrink. Insiders express concerns that if foreign trade comes to a halt, the Chinese economy will be in big trouble, leading to many factories closing down and a devastatingly high unemployment rate. They hope for the Communist Party to step down quickly, so that China can become a normal country.
The State Council of the People’s Republic of China announced on April 12th that starting from this day, the import tariffs on American goods will be increased from 84% to 125%. The announcement also stated that at the current tariff levels, American goods bound for China no longer have market acceptance. If the US continues to escalate tariffs on Chinese exports, China will ignore these measures.
Previously, China retaliated twice with increased taxes, resulting in the overall tax rate raised to 145% for exports to the United States.
“Right now, the quoted prices already include a 145% tariff,” said Ms. Huang, who works in foreign trade, on the 10th, to a reporter from Epoch Times. She mentioned that these prices are unacceptable, as one of her clients who used to order eight products now only placed orders for four, dropping the other four due to the increased tariffs.
“We in the foreign trade industry are truly on edge. Yesterday, I had already informed customers about the price increase, today it is 125%, and now it has gone up to 145%. It’s shocking, the profit margins will shrink. If it doesn’t work out, we must consider shifting the supply chain.”
Ms. Huang’s university classmates are also involved in foreign trade, and she stated that the impact of China’s retaliatory tariffs is incredibly strong.
According to her, one of her classmates owns a factory, with an annual revenue of tens of millions, 70% of which comes from exports to the US, making the impact significant. Additionally, another colleague, with an annual salary of 1 million yuan as a senior executive, used to frequently travel to the US for work, but this year decided against visiting the US. His company’s revenue, in the hundreds of millions, relies heavily on the American market for profits.
“Many companies rely on profits from exports to subsidize domestic expenses. They have hundreds or thousands of stores in China, all of which are in deficit and are sustained through profits from foreign trade. So, those depending on this model are suffering greatly.”
The textile industry is even worse off. “Chinese textile factories can keep prices low by receiving a 17% government export rebate, continually exporting goods. However, this 17% subsidy can’t offset the massive tariffs. Even with such high tariffs, the profit margins do not reach the 145%, leading to numerous textile factories closing down. Those who make it through May or June will likely see at least half of them go under.”
E-commerce, especially for packages under 800 US dollars, had a significant number of customers due to the tax exemption. Customs and Border Protection data showed that in the 2024 fiscal year, 14 million packages entered the US under this mode. Meanwhile, these low-value goods account for one-tenth of China’s total exports to the US.
“The US president insists on curbing fentanyl. Previously, small packages were subject to a 30% or 25-dollar tariff per item. However, after China’s retaliation, the tariff increased to 50 dollars. Today, it has risen to 150 dollars and now 200 dollars. Regardless of the item’s value, the added tariff can turn a 5-dollar item like a water cup into 200 dollars. How absurd is that?”
Ms. Huang analyzed that this has effectively blocked platforms like Temu, Pinduoduo, and cross-border e-commerce for these small packages. E-commerce has created many jobs in China, and the current situation is causing many factories to close down.
For instance, in April, factories in Zhejiang, China, were supposed to start receiving orders for Christmas from the US, but due to the tariffs, no orders have been received yet. Many American customers have not only halted new orders but also paused existing ones quietly.
The Christmas orders reportedly amount to over 4 billion US dollars annually. “From factories in Yiwu, one could see the state of the US economy. At that time, you could even see more Trump flags (campaign supplies) than Biden’s, indicating that Trump was likely to win. Customers pay a deposit when placing orders, say tens of thousands of RMB, around 50,000 dollars, while the Chinese manufacturers’ purchase costs are definitely higher than the deposits. Things have been put on hold, and cancellations are likely, leading to significant losses for the factories.”
“Having orders in hand but being unable to proceed is a predicament. With raw materials purchased and production already underway, one wonders how to sell the products. For domestic sales, where is the market in China? Although the population size is significant, the economic conditions of Chinese people are challenging, with squeezed disposable incomes making consumption difficult.”
Many Chinese people like to buy goods from Taobao and have them shipped to the US via sea freight. However, the tariffs increase before the goods reach the US, resulting in additional charges for all items not yet cleared customs.
Ms. S, who has worked with domestic shipping companies for a long time, mentioned that the shipping to the US is based on container units. The sudden spike in tariffs is alarming, with shipping companies increasing rates due to tariffs. The sea freight for general cargo has surged by 3 RMB/kg, along with a previous increase of 2 RMB/kg in the past two weeks, totaling a 5 RMB/kg hike, a substantial increase.
“This sudden increase, even affecting goods already en route at sea, requires absorbing costs without passing them onto customers. The past sea freight rates remained stable at 19 RMB/kg for years. It was because of the tariffs that within two to three weeks, it spiked by 5 RMB/kg. This has a significant impact.”
She learned that many factories are struggling to find work, as foreign investments are dwindling. If this situation persists, it will be tough domestically, with the populace facing a bleak future. The only option now is to wait and see; if the tariffs revert, the sea freight prices may decrease immediately. However, if the tariffs continue to rise, smaller shipping companies may struggle to survive.
“I feel for the Chinese people, many of whom rely on this (shipping) to support their families. If things truly come to a halt, facing unemployment and job scarcity will be the reality. Let’s hope for an improvement in the situation,” she stated.
Ms. Huang mentioned that China’s unemployment rate is already high, with forecasts reaching over 30% or even 40%, due to the soaring tariffs. Those in foreign trade possess specialized expertise and skills compared to domestic personnel. With the escalating competition for limited job opportunities, it is an unbearable situation.
“Unemployment amongst university graduates is a significant issue, as many intend to work in foreign trade. Those already employed in the industry are facing uncertainties, let alone fresh graduates. With millions of students graduating in July and August, the soaring unemployment rate really showcases Xi Jinping as the chief accelerator.”
Ms. Huang believes that tariffs have cut off the Communist Party’s last lifeline as their major revenue source was foreign trade profits. Previously relying on foreign investments and China’s real estate market, with foreign trade being the last resort, China’s economy is now at risk of collapse. The country may regress to a worse state than in the 1990s, or even to the Mao era, if the situation deteriorates further.
Industry insiders widely believe that many countries will follow the US’s lead in raising tariffs, as the US stance is clear. Other countries are likely to impose tariffs on China, ranging from 35% to 50%. “The US is like the Pacific Ocean, while other countries are like small lakes. When the water in the Pacific recedes, the lakes dry up first and faster,” Ms. Huang explained.
“We in this industry have a saying: hoping for the Communist Party to fall soon. We truly support Trump, as his strategy is wise, aiming to dismantle the party. Despite causing great harm to those in foreign trade, it’s a painful but necessary solution. Eventually, the Communist Party will crumble, and only then will the US ease its stance once China becomes a normal society.”
“Many speculate about a trade decoupling between the two countries, contingent on negotiations between their leaders. However, I find it improbable because Xi Jinping values his reputation and is unlikely to compromise. He is opting for domestic circulation, even if it means sacrificing his citizens. He values his prestige over everything and will persist,” she concluded.