How are China exporters coping with U.S. tariff hikes? Investing.com -- As U.S.-China trade tensions continue to reverberate through global supply chains, Chinese exporters are navigating a difficult environment marked by elevated tariffs and ongoing uncertainty. A recent UBS Evidence Lab survey of 200 senior executives from Chinese manufacturing firms with significant export exposure reveals the complex adjustments underway as businesses cope with the policy shock. According to the UBS survey, 81% of exporters to the U.S. reported a decline in current U.S.-bound orders compared to a year ago. This drop came after the United States raised reciprocal tariffs on Chinese goods to 125% in April before lowering them to 10% in May following the Geneva consensus. Despite the partial easing, most firms are bracing for further volatility. If current tariffs persist, 87% of respondents expect their U.S. exports to fall further, with nearly half projecting declines of more than 20%. The pressure is already evident in trade data. Chinese exports to the U.S. fell by 24% year-over-year in the second quarter, according to official customs figures cited by UBS analysts. Orders to other regions, meanwhile, showed mild improvement, with 34% of firms reporting an increase and 31% a decline. Amid these challenges, firms have turned to negotiation and pricing tactics. About 62% of exporters have reached preliminary agreements with their U.S. counterparts on revised trade terms. Despite this, the ability to pass on costs remains limited. On average, firms said they could shift only 35–40% of the additional tariff burden, compared to higher pass-through rates during the 2018–2019 trade war. UBS attributes this partly to a relatively stronger renminbi, which appreciated against the U.S. dollar by 2% in the first half of 2025, unlike the depreciation seen in earlier trade conflicts. To maintain competitiveness, half of the respondents said they may lower export prices, primarily in the range of 11–20%. Conversely, 29% plan to raise prices, possibly reflecting supply chain advantages or pricing power. Still, macro-level U.S. import data suggests that these price shifts are not yet widespread, with import prices from China declining by just 1% in the second quarter. Strategically, exporters are moving to diversify. About 46% reported plans to expand into non-U.S. markets, targeting regions such as the Middle East, Europe, and Northeast Asia. A further 38% intend to relocate more production to overseas factories, aiming to raise the share of offshore output from 44% in 2024 to 59% in 2025. Supply chain realignment is also gaining traction. UBS found that 63% of surveyed firms now plan to shift some production out of mainland China, up from 47% in April. Still, 55% of respondents said their decision to relocate is unrelated to tariffs, citing concerns over potential trade actions in new host countries or general policy unpredictability. In addition to corporate actions, the Chinese government has provided policy support. Roughly 78% of firms reported receiving aid, including subsidies for overseas expansion, credit easing, and help redirecting sales to domestic markets. Around 28% of exporters plan to convert an average of 32% of their U.S.-bound exports to domestic sales, which may add slight deflationary pressure to local prices. Despite some progress in U.S.-China trade talks, most respondents do not anticipate a swift resolution. While 94% expect a deal eventually, only 20% foresee one by the third quarter of 2025. Three-fourths expect negotiations to stretch beyond the current truce deadline of August 12. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Click Subscribe. #ChinaExporters #USTariffs #TradeWar #Economy #ExportChallenges

Analysis-Tariff-hit China exporters reluctant to heed government calls to sell locally By Liangping Gao, Ellen Zhang and Casey Hall BEIJING/SHANGHAI (Reuters) -Eno Qian, who runs a clothing factory in eastern China, says she makes a 20 yuan ($2.74) profit for every item she sells abroad and only a tenth of that on domestic sales, making a shift to the local market "not viable" for her tariff-hit business. Beijing has made increasingly louder calls on exporters to find local buyers as an alternative to the U.S. market, now frozen after Washington hiked tariffs on Chinese goods by 145%, but firms are concerned about complications in making the switch. Many export-reliant factories have decried weak domestic demand, price wars, low profits, payment delays and high product return rates in the Chinese market. Qian said she has "decided not to pursue domestic sales," because of thin margins and "cash flow risks" caused by Chinese retailers not paying bills on time, or demanding to return unsold items. "Foreign partners are more stable." These difficulties highlight the world’s second-largest economy’s over-reliance on exports for growth and the urgent need for measures to boost consumer incomes, analysts say. Without fiscal stimulus that boosts domestic demand, any increase in product supply in the Chinese market may even backfire, by squeezing businesses and intensifying deflationary pressures, they say. "In China, due to furious competition, the margin is very, very thin, or almost sometimes zero, which could cause some exporters to go out of business if they pivot to the domestic market," said He-Ling Shi, economics professor at Monash University in Melbourne. "This will further make the consumption power worse, because if people go out of business, obviously they don’t have income to buy in the domestic market." China’s commerce ministry said this month that one of its key strategies to mitigate the impact of U.S. President Donald Trump’s tariff hikes was to support exporters to sell more domestically. The ministry has since organised "matchmaking" events across China, including in Beijing, Guangzhou and Hainan island, bringing together manufacturers and e-commerce platforms, supermarkets and other retailers to see if deals can be struck. Local governments are forming special task forces to find solutions for the problems raised by exporters, including what officials identified as "unfamiliarity with the domestic market, lack of operational experience, and low brand awareness." CALLS FOR STIMULUS E-commerce giant JD.com has said it would launch a 200 billion yuan ($27.35 billion) fund to help exporters sell their products domestically over the next year. It said nearly 3,000 firms have already made enquiries - about 0.4% of Chinese companies engaged in foreign trade. Delivery firm Meituan has also said that it will help exporters with marketing and in other areas. But Qian said what she actually needs is support "in terms of taxes and subsidies." She lost 30% of sales as a result of U.S. tariffs and has had to cut staff. "In the worst-case scenario, we may have to shut down the factory," said Qian. David Lian, who manages an underwear factory in southern China, says the domestic market is "extremely price sensitive, with high promotion costs and frequent returns." Foreign clients place large wholesale orders, while the Chinese market is primarily "retail and small batches," he said. He is looking for new customers in the Middle East, Russia, central Asia and Africa. Liu, who exports lighting products out of a factory in the eastern city of Ningbo and only gave her surname, said she would need to hire a separate team to push domestic sales. "We are a small firm and don’t have the energy for that," she said. The Communist Party’s elite decision-making body, the Politburo, is expected to meet this month and efforts to support exporters’ domestic shift will likely feature in the state media summary of the discussions. Shi, the professor, says this would mainly serve to project strength to the domestic audience and defiance to Washington. Economists are more focused on any concrete demand-side stimulus steps. China’s retail sales last year amounted to 43.2 trillion yuan ($5.92 trillion), more than 11 times its exports to the U.S. of 3.7 trillion yuan. Theoretically, a 2 trillion loss in U.S. sales over the next two years could be offset by a 4% rise in consumption over the same period, Capital Economics analyst Julian Evans-Pritchard estimated. But, he said, consumers won’t dip into their savings if they don’t feel confident about the economic outlook or unless the government commits to more generous social benefits. Alternatively, wages have to rise at a fast pace, which is unlikely given the tariff blow on employers, he said. ($1 = 7.2976 Chinese yuan renminbi)

Click Subscribe. #ChinaExporters #TariffImpact #LocalSelling #GovernmentPolicy #TradeRelations

Click Subscribe. #Tencent #Douyin #ChinaExporters #DomesticMarket #TechGiants