Tit-for-tat tariffs mean that virtually all trade between China and the US will be affected Photo: AFP
business

Chinese firms learn to adapt as U.S. trade war rages

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By Ryan McMorrow

Export-reliant Chinese companies are slashing prices, moving production abroad, creating new domestic markets and even rebranding goods as they try to survive the escalating trade war with the United States.

Factories along the eastern coast, fish processors in the south, apple juice exporters in central China and farmers in the northeast have all been forced to change their business models since U.S. President Donald Trump launched the conflict more than a year ago, hitting everything from motorcycles to MRI machines.

But no matter what the survival tactic, times are tough and set get worse with newly threatened tit-for-tat tariffs meaning that virtually all trade between the world's two biggest economies would be covered.

"It's impacted all of us exporters... we include the tariffs in our quotes now," a sales manager at Shaanxi Hengtong Fruit Juice, who gave his surname as Liu, told AFP.

Chinese apple juice exports have nosedived 93 percent in the first half of the year since Trump hit them with tariffs in September last year.

Shaanxi Hengtong Fruit Juice, which sends almost all of its product abroad, and some of its subsidiaries had to pledge shares as collateral for loans last year.

One of its juice plants also put up dozens of its machines and appliances as collateral for another loan.

The fish processing industry has been hit hard too. China is the main supplier of frozen tilapia to the American market, but those exports are also down this year and fish farmers have been forced to look inward.

"The United States is taking advantage of its market position and bullying the many scattered Chinese tilapia suppliers," the Hainan Tilapia Sustainability Alliance said on its WeChat account.

"The trade war is the last straw to crush the industry."

The trade group has been brainstorming how to grow sales at home, but different domestic tastes mean it has its work cut out for it.

"Tilapia has done very well in the U.S. because it's breaded and processed... it's kind of bland. Chinese consumers like their fish fishy," said Even Pay, an agriculture analyst at advisory firm China Policy.

Large fish processor Zhaoqing Evergreen Aquatic retrofitted its factory this winter to focus on the domestic market, according to industry publication Undercurrent News.

Firms in other hard-hit industries have simply had to absorb some of the tariff pain.

"We've dropped our prices for the U.S. market to cover some of the tariffs," said Andy Zhou of Anytone, which makes radio handsets.

Radio exports to the U.S. were down to just $33 million in the first six months, from $230 million a year before.

Zhou, too, is looking to Asian and European markets now to boost sales.

Some struggling low-end radio manufacturers have been forced into drastic measures such as attempting to dodge U.S. tariffs by swapping customs codes -- where a product is incorrectly labelled to evade levies when it arrives in America.

Other firms have resorted to transshipment -- re-routing their goods via neighboring Vietnam to pass them off as being made there.

Hanoi has vowed to crack down on Chinese manufacturers illegally using "Made-in-Vietnam" labels to dodge U.S. tariffs, fearful of the punishment it could face from Trump over its annual trade surplus of $40 billion with the United States.

New rules proposed by the trade ministry last month require all "Made-in-Vietnam" labelled goods to be mostly or fully produced in the country or contain a significant share of locally-sourced materials.

They also bar "temporarily imported" goods from using the label.

Some Chinese firms have moved manufacturing abroad to countries like Indonesia, Vietnam and Malaysia to skirt tariffs.

Textile maker Jasan Group, which says it supplies Adidas and Nike, bike parts manufacturer HL Corp, and industrial yarn producer Zhejiang Hailide New Material have all moved some production to Vietnam.

But the trade war has helped some Chinese sectors.

Beijing's retaliatory tariffs have benefitted some of China's soybean farmers, with a boost in subsidies to local growers.

"The government is encouraging us to plant more soybeans... our incomes are rising with the subsidies," said Sun Changhai, a farmer on an agricultural collective in the northern Inner Mongolian region.

The subsidies have boosted China's soybean output but it still needs to import roughly 85 percent of what it consumes each year –- including some from top producer the United States.

© 2019 AFP

©2019 GPlusMedia Inc.


2 Comments
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Trump making America Great!

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Trump doesn’t know when to fold.

If you were a corporate board member, would you hire a CEO who had filed bankruptcy six times, or look for a better candidate?

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