Chinese factories welcome any tariff relief from Trump-Xi summit, but diversification continues
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Chinese factories want more business, but are not building a strategy around the expectation that US tariffs will go down.
PHOTO: AFP
- Chinese manufacturers are wary of US tariffs, despite warming US-China ties. They are diversifying production abroad and seeking new markets instead of betting on tariff relief.
- US tariffs, peaking at 47.5 per cent in 2025, caused significant losses and sales drops for Chinese companies, making them view the US as an unreliable partner.
- Even with recent US-China talks on reciprocal tariff reductions and a "Board of Trade", manufacturers are committed to diversified supply chains, especially in technology.
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SHENZHEN/CHONGQING – As Presidents Xi Jinping and Donald Trump talked trade at a high-stakes summit in Beijing this week, Mr Wade Zhan had little time to follow the news – he was busy touting snow globes and Christmas ornaments at an e-commerce fair in Shenzhen.
Standing aside an inflatable Santa Claus, a favourite of American buyers during the festive season, Mr Zhan told The Straits Times that he “would certainly look forward to” any tariff relief stemming from the summit, as “that’s the only way business can be good”.
Festive decorations maker Huizhou Sunrise Technology, where Mr Zhan works, sells more than 70 per cent of its goods to the US, he said. When the US hiked levies on Chinese imports in 2025, Mr Zhan’s sales dropped by about a fifth.
But the company, like many others that ST spoke with, has not staked its survival on lower tariffs – even as US-China ties showed signs of warming following President Trump’s May 13 to 15 visit to Beijing.
In line with a strategy by Chinese manufacturers to hedge against American levies, Huizhou Sunrise set up an overseas factory in 2024. It made some lower-value items in Cambodia, but some production has been moved back to China after the tariff gap narrowed.
Chinese factories want more business – including from the world’s largest consumer market – but are not building a strategy around the expectation that tariffs will go down, said Mr Ash Monga, founder of Guangzhou-based IMEX Sourcing Services, which provides supply chain management services.
“If it works out, that’s great, but we’re not going to bet our money on it,” he said of the prevailing attitude among the producers he works with. Companies had been burned enough to know that planning around US demand is risky, he added.
The average US tariffs on Chinese goods stood at about 47.5 per cent as at November 2025, far higher than what America imposes on the rest of the world – and more than 15 times higher than before Mr Trump launched a trade war with China in 2018, according to the Peterson Institute of International Economics.
The US’ ratcheting up of tariffs, which came to a head in 2025, has led Chinese factories to find new ways of doing business, moving production abroad and securing new buyers in other markets – a strategy that manufacturers say they intend to keep.
“We don’t put all our eggs in one basket,” said Mr Jacky Cai, sales manager at Jiangxi Jiujiayi Toys, who was also at the Shenzhen fair that ran from May 14 to 16. The maker of pool floats and surfboards stepped up efforts to sell more to Europe and South-east Asia after tariffs shrank orders from the US by about a third in 2025.
Mr Cai added that he would welcome lower tariffs but said he was not optimistic about such a prospect. After riding out a bumpy 2025 with tariffs that “changed again and again”, it was unclear if any trade concessions announced by Mr Trump would be particularly durable, he said.
Likewise, factory manager Zheng Yang paid little heed to the outcomes of the meeting between Mr Xi and Mr Trump this week because he was convinced that the US is “not really a reliable partner”.
Mr Zheng, whose plant in Chongqing makes laptop parts, said: “The US has been such a wild card, and we need certainty for business and sales operations.”
His company learnt this the hard way during Mr Trump’s first term in 2017, when business “suffered huge losses” after the US started a bruising trade war with China.
Mr Zheng and his business partners started investing in factories in Thailand and Vietnam from 2019, which helped to diversify their markets to include South-east Asia and Australia. Previously, his main markets were the US and parts of Europe.
The summit between Mr Trump and Mr Xi struck a positive tone and marked the first of potentially up to four meetings between the leaders in 2026.
The US and China have agreed to establish a “Board of Trade” and a “Board of Investment”, and will promote the expansion of two-way trade under a framework of reciprocal tariff reductions, Chinese Foreign Minister Wang Yi said in a statement late on May 15. The details were still under consultation, he added.
US officials have said the Board of Trade could facilitate trade in non-sensitive areas by reducing tariffs on goods that are not deemed critical and not a target of reshoring.
Mr Zheng was unmoved by the bonhomie between the Chinese and US presidents in Beijing. “We are not going to change our supply chain strategy because of the optimistic tone from the recent meetings,” he said.
“Furthermore, we are in the business of tech production, a market that the US has deemed sensitive, so it is even more important for us to stay on our course of market and supply chain diversification.”
