By Eric Vandenbroeck and co-workers

Trump Tariffs Effect

China has called for the world to unite against Trump's tariffs as the country's exporters reel from crippling new US levies that have risen to 104%.

"Global unity can triumph over trade tyranny," declared an editorial in the state-run newspaper China Daily, noting Beijing's collaborations with Japan, South Korea, and other Asian economies. A separate piece called for the European Union to work with it to "uphold free trade and multilateralism".

Beijing "firmly opposes and will never accept such hegemonic and bullying practices," foreign ministry spokesperson Lin Jian told reporters on Wednesday.

The tariffs come at a difficult time for China's sluggish economy: Domestic consumption remains weak, and exports are still a major driver of growth.

The sweeping nature of Trump's tariffs has also left Chinese businesses scrambling to adjust their supply chains - with most countries affected, firms say it's hard to find a way out of this uncertainty.

The tariffs will shrink "already razor-thin profit margins", said the owner of a Chinese business that handles cross-border logistics for e-commerce, as well as air and sea freight. He did not wish to share his name.

"Higher tariffs raise costs for freight forwarders like us, as well as for factories, companies, and sellers. It just means everyone earns less."

Any tariff upwards of 35% will wipe out all the profits that Chinese businesses make when exporting to the US or South East Asia, said Dan Wang from the Eurasia Group consultancy.

"Growth is going to be much lower since exports contributed to 20% to 50% of growth since the Covid pandemic," she added.

The Chinese government has not announced retaliatory measures but Beijing is reportedly considering banning Hollywood films and suspending fentanyl cooperation with the US, according to Chinese blogger Liu Hong, who is a senior editor at state-run Xinhua news.

But that would offer little comfort to firms like Fuling, a firm that sells disposable tableware to US fast food restaurants like McDonald's and Wendy's, said the additional tariffs will "significantly impact" its business. It noted that nearly two-thirds of the company's revenue in 2023 and the first half of last year came from the US.

To mitigate the impact of tariffs, Fuling, which is headquartered in China's Zhejiang province, started a new factory in Indonesia late last year.

But Trump's new tariffs have introduced more uncertainty for Chinese exports from Indonesia are now subject to a 32% levy, the company said in a corporate filing.

Some Chinese companies say the tariffs deal a "fatal blow" to their already razor-thin margins

Indonesia was hit along with much of the world in President Trump's announcement of expansive tariffs last week, which he claimed would allow the US economy to flourish.

But economists have warned of a US and global recession. The tariffs have also shaken global markets and drawn criticism from billionaire CEOs, including Trump's ally Elon Musk.

Trump's import taxes include a 10% baseline tariff on almost all imports to the US and higher custom tariffs for what he calls the "worst offenders". These include Cambodia (49%), Vietnam (46%), and Thailand (36%), developing economies that have benefited from strong exports.

After Beijing announced tit-for-tat tariffs, Trump raised the levies on Chinese imports, more than doubling them to 104%.

The owner of the logistics firm told the BBC he is holding out hope that China will be able to negotiate away some of these taxes: "Only when a final decision is made can we plan our next steps."

While China has left the door open for talks, Trump has not spoken to Chinese leader Xi Jinping since returning to the White House.

Such broad, sweeping tariffs will cause more harm than good, the American Chamber of Commerce in China said in a note to its member companies on Wednesday.

"This level of upheaval is unprecedented, and it remains unclear how the current measures will benefit consumers in either nation or the broader economy," read the note signed by Chair Alvin Liu and President Michael Hart.

Trump is yet to speak to Xi since returning to the White House

Some analysts believe the levies will force China to restructure its economy and rely heavily on domestic consumption, which it has been struggling to boost.

Otherwise, the tariffs will not be sustainable for China in the longer term, Tim Waterer from brokerage KCM Trade said.

"The tariffs are aimed at suppressing China," said the manager of a Chinese freight company, who asked to remain anonymous.

He added that many of the Southeast Asian countries that have been hit with steep tariffs are "exactly where many Chinese businesses have relocated", such as Vietnam and Cambodia.

The Tianjin-based company plans to negotiate with some of its American clients to share the burden of the tariffs. "Every case is different, but overall, the impact has been quite substantial," he said.

Another freight company manager, Wu Changchun, whose firm mainly operates on shipping routes between China and Cambodia, said he is already seeing a fall in freight volume.

Several construction projects in Cambodia have also come to a halt after Trump's tariffs announcement, he said.

"If the tariffs were at 10% or 20%, businesses might still be able to absorb the cost by optimizing supply chains, cutting margins, and sharing the burden.  Trade could still go on... [But at 104%] that's no longer something trade-offs can fix," said Wu, a general manager at Maritima Maruba.

"That's full-on decoupling. Trade would basically come to a standstill."

 

 

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