Faced with Washington, Chinese exporters are looking for a way out

The trade war between the United States and the rest of the world is no longer multilateral: it is now head-on and bilateral. Some people are delighted. Chinese companies are not. Faced with yet another dramatic increase in tariffs imposed by Donald Trump, many of them are preparing to raise their prices on Amazon or leave the US market altogether.

On Wednesday Donald Trump announced his intention to raise tariffs on Chinese imports to 125%, from the current 104%. A tougher stance that worsens an already tense standoff between the world's two leading economies.

China accounts for almost half of all active sellers on Amazon. In Shenzhen alone, more than 100,000 companies are registered, with an estimated annual turnover of $35.3bn, according to SmartScout.

Leave, relocate or cash out

Faced with these soaring tariffs, Chinese exporters are hesitating between several strategies: some are considering relocating production to Vietnam or Mexico to preserve their margins. Others prefer to stay in the US market, even if it means sacrificing profits in the hope of a turnaround. The more cautious are exploring new outlets, notably in Canada and Europe.

"It's not just a matter of taxes: the whole cost structure is being called into question", explains Wang Xin, director of the Shenzhen Cross-Border E-Commerce Association. She says that surviving on the American market is becoming increasingly difficult, especially as customs duties are causing logistic delays and additional costs.

The fact remains that, for Chinese sellers, no market rivals the US in either volume or value. Shifting sales to other regions would not be enough to offset losses, and risks triggering a price war between Chinese exporters to the detriment of their profitability.

Asia's neighbors in ambush

When tariff hikes hit all countries, Chinese exporters had few options. Now, with Beijing a direct target, an alternative is emerging: produce elsewhere to continue selling to the United States. Regional relocation is becoming a credible solution.

This change of direction could also explain the recent surge in certain tech stocks, such as Apple (+15%) et Amazon (+12%). A return of production lines to the United States seems unrealistic, but a redeployment to Southeast Asia seems a credible option.

Chinese low-cost suppliers, working for major American groups such as KFC or McDonald's, are on the front line. Until now, they had asked their partners to absorb the additional customs costs. "The main American customers have asked us to bear part of the increase," confides Mr. Fuling, a supplier to these fast-food giants.

However, if the trade war drags on, these groups may well end up turning their backs on Chinese suppliers. And if that happens, Chinese growth would suffer the consequences. A rapid rise in unemployment in China would be inevitable.

For the moment, US stocks are cushioning the blow. But the wait won't last forever. On the Chinese side, manufacturers are now hoping that Beijing will show pragmatism and put its ego aside.