Chinese exporters like Huang Yongxing are desperate for some straight answers so they can start making and shipping goods from their factories in either China or Southeast Asia.
And the answers – or at least updates – that Huang does get, he shares on his social media account via weekly updates that have gained traction among owners of small and medium-sized businesses as disruptive and volatile tariff policies out of Washington continue to redraw the profitability lines for manufacturers.
They now face a prolonged dilemma over investments, as some of their overseas factories are staring down the barrel of US President Donald Trump’s “reciprocal” tariffs of up to 40 per cent on 14 countries, most of which are major destinations for Chinese exports.
Trump’s move, announced on Monday, puts Southeast Asia – China’s largest export market – in Washington’s trade crosshairs while dealing a direct blow to Chinese exporters’ transshipment strategies throughout the region.
American policy ambiguity on transshipment, with high tariffs threatened but lacking implementation details, creates huge uncertainties for outbound Chinese investors.
In response, many Chinese companies – both those that have already expanded overseas and those with plans to do so – have had little option but to play it safe.
Huang, a lighting product exporter based in Zhejiang province, has had to repeatedly revise plans to open a factory in Cambodia due to Trump’s shifting trade stance in recent months.
“Clients were pushing me to set up production somewhere in Southeast Asia, but that means double spending – keeping my Chinese factory running while investing in a new one,” he said in a recent video posted to WeChat, China’s ubiquitous messaging app.
“With immature local supply chains, it will take at least two years to gain new clients. The reality would be double the expenses, but with only one income.”
Six of the 10 members of the Association of Southeast Asian Nations are affected, with Cambodia, Thailand, Indonesia, Laos and Myanmar facing tariffs ranging from 25 to 40 per cent. Among them, Laos and Myanmar would be subject to the highest tariffs of 40 per cent, and the added cost would render Chinese companies’ mode of re-exporting to the US through these countries virtually ineffective.
Shaped by years of escalating trade actions and policy shifts, the current weighted average tariff on Chinese imports is estimated to be 42 per cent, according to Morgan Stanley. UBS put the rate at 43.5 per cent.
“No matter what you choose, it feels wrong,” said another lighting exporter, Levi Tan, in Guangdong province. “Those fellows who have already built factories can’t sleep at night.”
Industry insiders have warned that, while the trend of “going global” continues, rising uncertainty surrounding tariffs is rapidly shrinking Chinese exporters’ strategic flexibility.
“Without stable expectations, every investment is a gamble,” said supply-chain expert Liu Kaiming, who is familiar with re-routing models.
“Cambodia currently only has a relatively complete industrial chain in the garment industry, and Laos and Myanmar only have scattered factories,” Liu explained. “Once included on the high-tariff list, Laos and Myanmar re-exports would be hardly feasible, and Chinese factories investing there will surely suffer huge losses.”
Liu said he believed that Southeast Asia would continue to play a key role in shifting China’s supply chain, but also that the process is proving much harder than many enterprises had initially envisioned.
“From production capacity building to capital mobilisation, all costs are rising,” Liu said. “Trump’s policy reversals are so frequent that many business owners feel like whatever they do is the wrong choice.”
Hardware exporter Kevin Huang in Guangdong echoed those concerns, noting how constant changes in US tariff policy were intensifying short-term risks. “Some peers just finished setting up their factories but are already facing cash-flow collapse,” he said.
And with his US customers “suffering losses and delaying payments”, Huang said: “I don’t dare to continue shipping now, and all I can do is prepare to account for bad debt.”
Some domestic manufacturers, however, see an unexpected upside.
“If Southeast Asia is hit with tariffs, we might actually gain a relative edge,” said Wang Shui, a manufacturing exporter of pet products in Guangdong.
“We’re not afraid of tariffs. As long as we can deliver quality products, clients will still place orders. Many products Southeast Asia simply can’t produce.”
Still, Wang acknowledged that the broader trade environment was growing increasingly precarious.
“Whether staying in China or expanding abroad, manufacturers are facing unprecedented uncertainty,” he lamented. “With US policy shifting daily, no one knows what’s coming next.” - SOUTH CHINA MORNING POST
