Hong Kong
CNN
—
A surprise breakthrough in US-China trade tensions has unleashed a flurry of activity across Chinese factories and ports as companies in both countries rush to make the most of a 90-day rollback of heavy tariffs announced earlier this week.
For Niki Ye, a salesperson in southern China who sources toys for sale on Amazon, a 30% spike in orders since that announcement has meant her company is staffing up to meet demand. “And this is only the first week,” she said.
Liu Changhai, a sales manager at an export-oriented agency in eastern China that specializes in home furnishings, said sales now match those during a typical peak season – but there would be a delay in sending goods.
“The new orders have not been manufactured yet and are not ready for shipment,” he told CNN.
Meanwhile, ports are about to start humming as companies rush to ship out inventory that had been held back during weeks of trade tension. Bookings for shipping containers from China to the United States spiked almost 300% in the seven days ending May 13, compared to the week ending May 5, according to container-tracking software provider Vizion.
That’s a radical shift from last month, when a rapid, tit-for-tat escalation of US-China tariffs initiated by President Donald Trump drove duties so high that trade between the two once deeply intertwined economies largely ground to a halt.
On Monday, American and Chinese trade negotiators meeting in Geneva announced both sides would reduce tariffs by 115 percentage points for an initial 90 days.
The deal, which went into effect Wednesday, brings US tariffs on Chinese imports into the country to 30%, not including pre-existing measures imposed during Trump’s first term. China’s duties on all US imports raised last month, meanwhile, fell from 125% on most US imports to 10% – though earlier tariffs on select goods also remain in place, officials said. Negotiations are expected to continue in the weeks ahead.
“Regardless of the outcome of future negotiations, companies must seize this 90-day window,” Ge Jizhong, chairman of major customs declaration firm Shanghai Xinhai Customs Brokerage told state-backed financial outlet Securities Times earlier this week.
“American companies will rush to replenish their stocks within 90 days, and Chinese companies will also rush to ship goods and clear out their warehouse inventories.”
‘Move them back to China’
Among those helping companies navigate that rush is Ben Schwall, whose China-based supply chain management firm STG Consultants helps companies with product sourcing and their China and Asia strategies. He says he’s spent this week fielding queries from clients.
Some of them heard the news while in the middle of re-routing supply chains and manufacturing away from China to other Asian countries to avoid the tariffs, he said.
“We have orders that have been placed in Vietnam and in Indonesia and we’re now asking ‘Can you move (the orders) back to China?’” Schwall said. Then there’s a scramble to restart canceled orders or ship held-over goods from China, he added, even though tariffs remain higher than they were before Trump’s second term.
“It’s a ‘please continue the orders that were canceled’ situation,” he said of communications with Chinese manufacturers, some of whom Schwall said had already furloughed workers, while at least two factories they work with had shut down in the wake of the tariffs.
On the other side of that equation are Chinese manufacturers like Vivi Tong in eastern Zhejiang province, who is preparing to ship goods from her warehouse and for a surge in orders. Her factory makes remote-controlled cars sold by big box retailers in the US.
“As a factory, we hope to receive as many orders as possible in these three months and complete production and shipment as soon as possible,” said Tong, adding she “cannot estimate” what will happen after that period.
According to Chinese state media, suppliers are working overtime and even into the night to meet a surge in demand from US companies clamoring for stalled orders to be shipped within the 90-day window.
Greg Mazza, who owns a lighting company based in Danbury, Connecticut, said he was among those “acting rapidly” to receive inventory that had been produced in China earlier, but not shipped out, since he was concerned about increased shipping costs as many companies did the same.
“We did release a lot of containers now, or they’re being released, and we are placing orders,” said Mazza, who noted that he was in a better position than some companies having prepared for tariffs by building up his inventory in the US last year.
However, Mazza said his orders under the new agreement would still face significantly higher tariffs than last year.
“If I have to sustain the 55% tariffs I can do that with a small price increase by the time (the goods) land and some program changes internally,” he said, referring to total duties expected to be imposed on his product. He would aim to “hold the line” as much as possible instead of raising prices, he added.
But it’s not just tariffs that threaten to increase prices for Americans.
Tong, in Zhejiang, said she’d seen a hike in shipping costs this week amid the broader scramble to restart trade. The cost of shipping one container, previously running at $4,000 for the journey to the US, is now up some 50%, an increase she said was borne by the US buyer. Ultimately, the added cost is likely to be paid by American shoppers.
Meanwhile, shipping firms are also reporting an uptick in demand.
Danish shipper Maersk, which had seen a 30% to 40% drop in China-US ocean volume in late April, is now adding capacity to its trans-Pacific services after an increase in bookings following the agreement, a spokesperson told CNN.
Ben Tracy, vice president of strategic business development at Vizion, the shipping container tracking firm that observed a 277% surge in bookings for the seven days ending Tuesday, said the “container export rush” could interfere with what would typically be a peak shipping season in summer.
“The question is – how long is that (rush) going to last? How much of a backlog has been waiting for bookings and departures – and is that going to go on for three weeks, for six weeks?” he said. “Either way … I don’t see how there’s enough time for these containers to make their way back to China for the next voyage around the peak season.”
Uncertainty looms
The mad scramble to restart, ramp up or ship out orders from China is all the more complex for businesses due to pervasive uncertainty not only around where US-China tariffs will ultimately land, but also US duties on other countries in the region.
Trump last month announced, and then largely paused, a host of so-called reciprocal tariffs on most countries. Those included high levies on goods from Southeast Asian countries like Vietnam and Cambodia, which had become a destination for companies shifting production from China during Trump’s first trade war.
Now companies that rely on exports from the region are looking at two ticking clocks, one counting down the 90-day pause on tariffs from countries like Vietnam and the other on those from China, as they decide whether to uproot years-long business relationships in China.
Mazza, in Connecticut, said he had been exploring moving some manufacturing to Vietnam, where the set-up process is likely to take about a year and production would eventually cost him about 10% to 15% more per unit than manufacturing in China.
But he said he wasn’t ready to give up on China entirely.
“I’m going to do everything I can to not get out of China, because my China factories have been there for me, I’ve been there for them … I value partnerships, and relationships and, look, they make my product really good,” he said. “So I’m going to fight till the end.”
And for many factories in China looking at the same uncertainty, the question of how to survive, come what may, is the top priority.
“We are also working hard to expand other new markets … especially Europe, (where our orders) have increased by almost 20%,” Tong said. “We need to expand.”