By Eduardo Baptista
BEIJING (Reuters) – Chinese manufacturers of goods from tableware to flooring are flagging profit warnings, scrambling to plan new overseas plants or accelerate offshore projects, while haggling with customers over prices as they reel from President Donald Trump’s tariffs.
Last week, Trump introduced an additional 34% tariff on Chinese goods as part of steep levies imposed on most U.S. trade partners, bringing the total duties on China this year to 54% and sending global stock markets tumbling.
While some in China’s corporate sector have put on a brave face and said the tariffs will have little impact on operations and margins, others have revealed through corporate filings emergency plans to curb losses.
For many, Trump’s blanket tariffs threaten to upend supply chains, and navigating the twists and turns of business negotiations and trade policy has become increasingly difficult. His world-wide tariffs strike Chinese exporters’ two main strategies to blunt the impact of the trade war: moving some production abroad and increasing sales to non-U.S. markets.
“It’s like throwing darts blindfolded. You don’t know what direction you’re going in. You don’t know where the tariffs are going to land,” said Larry Sloven, who has sourced from China for major U.S. retailers for more than three decades. “Once the hammer drops, you don’t know where the hammer will fall after that.”
Chinese suppliers of low-end goods to U.S. conglomerates that are already operating on razor-thin margins have been hit particularly hard.
Fuling, which sells eco-friendly tableware to U.S. fast-food giants including KFC and McDonald’s, said this week in response to fluctuations in its stock price that Trump’s tariffs would “further negatively impact the company’s operations”.
The company, which was designated a “manufacturing champion” by Zhejiang provincial authorities last year, said it would try to launch a new production facility in Indonesia this year that would take over part of the U.S.-facing production in China, but until then the company’s profitability could be affected.
A 20% tariff imposed on China by the Trump administration earlier this year has already been detrimental as “major U.S. clients asked the company to absorb part of the increased tariff costs,” Fuling said.
Suppliers of key raw materials used in electric vehicles are also trying to find alternatives to China-based manufacturing.
Lopal, which supplies lithium iron phosphate cathode materials – a crucial component in making the lithium batteries that power EVs – said this week it would look for opportunities to build a second overseas plant to “decrease the tariff’s effect on the company as much as possible.”
