FT: Chinese manufacturers shift production to bypass US tariffs

Chinese manufacturers are ramping up efforts to shift production to other countries in response to new tariffs imposed by the United States.

This move comes after President Donald Trump announced a fresh trade offensive against China, signalling an additional 10 per cent tariff on Chinese goods.

In response, as per a recent article by the Financial Times, Beijing is weighing potential retaliation measures, including counter-tariffs, export controls, and even currency depreciation, Caliber.Az reports.

Although China’s initial response has been relatively restrained, coupled with Trump’s recent truce with Canada and Mexico and his upcoming call with Chinese President Xi Jinping, there are growing hopes in Beijing for possible negotiations. However, with the new tariff set to take effect imminently, many Chinese manufacturers in the country’s southern industrial hubs are already formulating strategies to minimize the impact. These plans include relocating production to regions like the Middle East, passing increased costs onto US customers, and exploring new markets outside of the US.

Michael Lu, president of Brothersbox, a China-based gift box manufacturer, explained that many exporters had already seen a decline in their US market share in recent years due to previous tariffs implemented during Trump’s first term. Lu revealed that Brothersbox is planning to shift some of its production to the United Arab Emirates, hoping to win back US customers who had previously turned away.

Trump’s latest tariff threat, aimed at China over its alleged failure to curb fentanyl exports to the U.S., was a recurring issue during his presidential campaign. However, Chinese companies have been diversifying their exports for some time, with China’s share of US imports dropping by eight percentage points from 2017 to 2023, according to a Rhodium Group report. Countries like Vietnam and Mexico have seen a significant increase in their share of US imports during this period as Chinese manufacturers shift production to these regions.

Experts predict that the U.S. will continue to impose additional tariffs, particularly following an investigation into the 2019 US-China trade deal, which Trump ordered to be concluded by April. While China’s imports of US agricultural products have increased slightly since the deal, purchases of American manufactured goods declined in 2020 and 2021 as the pandemic disrupted global supply chains.

Economists suggest that these policies may inadvertently benefit China’s economy by forcing the country to focus on much-needed structural reforms, such as shifting more resources toward boosting household consumption rather than investing in infrastructure and industry. Despite these challenges, China reported a record trade surplus of nearly $1 trillion last year, relying on external demand to offset domestic economic slowdowns, including a struggling property sector.

By Tamilla Hasanova