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May 4, 2018
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Tinker, tailor, robot maker: In China, trade war threat casts long shadow

By
Reuters API
Published
May 4, 2018

The United States is threatening to slap tariffs of 25 percent on over 1,300 Chinese products, including medical devices, robots and sewing machines, valued at around $50 billion. That follows levies on aluminium and steel.


Sewing machines are on the list proposed for the tariffs - Photo: Creative Commons



The U.S. tariffs could go into effect in June following the completion of a 60-day consultation period. China has threatened retaliation in equal measure, including tariffs on major U.S. exports like soybeans and aircraft.

EXPANSION PLANS

Some business leaders are already seeing tangible impacts and are shifting sales elsewhere or scrapping factory expansion plans as U.S. orders drop. Others are grappling with the uncertain outlook the trade war threat brings.

China's state media said on Friday that reaching a deal to avert a trade war would not be easy and "failure would herald a slugfest of tariffs that would leave global trade reeling".

Companies that could be hit include the likes of Wagon International Co Ltd, which is seeing a weaker performance from U.S. sales of its metal accessories for luxury brands and its soccer merchandise that it makes as an authorized partner of FIFA - although it's not all trade related.

"Because they didn't get into the World Cup, sales forecasts there are about 60-70 percent lower than what we had estimated," Perry Chou, Wagon's vice president told Reuters, referring to the United States. He added that trade frictions would however hit others areas of the firm's business.

"GOING TO WAR"

In the port city of Ningbo, Joan Lu is anxious about rising pressures on the price of the fabric printers her company sells - 40 percent of which go to the U.S. market - as clients look for discounts to offset higher import levies.

"The whole industry is worried," Lu said. "Future orders from clients will certainly come under pricing pressure, that's for sure." Lu added: "It's not just a little extra - it's 25 percent. If we're talking a $10,000 deal then you'd be adding $2,500."

Lu said her company would not abandon the U.S. market, "but we are putting all our energy into developing other markets".

The United States is China's largest trading partner with $506 billion worth of U.S. imports from the country last year, according to U.S. trade data. A large trade surplus with the United States is partly behind recent tensions.

In Yiwu - a sprawling city known for exporting huge volumes of gadgets, toys and Christmas decorations - merchants were more circumspect about the impact, but were keeping close tabs on developments.
"We've been following the news on our phones," said Yang Dingju, a manager at Zhejiang Bote Sewing Machine Co Ltd, as he peeled an orange inside his store in a cavernous trading hall.

He added, however, that most of his buyers were in less developed markets like the Middle East and Africa, which would dull any impact.

Chen Haiying, who worked for another Yiwu firm selling sewing scissors and sewing machine parts, was at a loss as to why sewing machines were on the U.S. list, but said a full-blown trade war would have a wider ripple effect.

"If we really go to war with the United States then it will affect everyone," he said.
 

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