The South China Morning Post (SCMP) on Tuesday found a sense of gloom settling over the vast electronics market of Shenzhen, China, as President Donald Trump’s tariffs pushed up prices and all but halted orders for computer products.
The SCMP talked with distributors in Huaqiangbei, a district of the tech hub city of Shenzhen that specializes in the chip trade. According to these distributors, prices for popular chips from major U.S. manufacturers skyrocketed by up to 40 percent after Trump’s tariffs were announced, killing demand for end-user products.
There was still retail traffic on the streets of Huaqiangbei, but insiders expected over-the-counter electronics sales to plummet within the next few days.
“Orders have plunged since last week. We’ve had almost no orders in recent days due to the price increase,” one distributor said.
“There’s no point in working right now — we’re not making any money, and staying open only adds to our expenses,” the distributor added.
The Washington Post found China’s e-commerce industry “despairing” because Trump’s huge 145-percent tariff was sure to kill their thriving business with American customers.
“My biggest worry is that our companies won’t survive the next few months and will go bankrupt,” said Wang Xin, head of a Shenzhen e-commerce association whose members do a great deal of business with Americans online.
China’s “fast fashion” and micro-shipment retailers, exemplified by Shein and Temu, could be absolutely devastated by the tariffs. Trump said he intended to close the de minimis loophole that allowed these businesses to thrive — and facilitated shipments of deadly fentanyl chemicals into the United States — by exempting packages worth less than $800 from duties and inspections.
A tax of 120 percent will hit those small packages beginning May 2, which could destroy the business model that enabled Shein and Temu to thrive by selling very small orders over the Internet and shipping the products directly to customers without any distribution presence in the United States. Many of the top sellers on Amazon.com are also Chinese companies selling individual items through Amazon’s vast shipping network.
The Washington Post reported these Chinese micro-retailers were upbeat about their chances to use aggressive online marketing to survive Trump’s early tariffs of ten or twenty percent, but their smiles are fading as tariffs of 120 percent and more come crashing down, creating insurmountable barriers to the American market.
Some market analysts still believe Chinese producers are clever and adaptable enough to survive the high tariffs, in part because their cost advantages are so huge that even triple-digit tariffs will not completely eliminate their ability to undersell American and European competitors.
The Chinese government could also step in with subsidies to help manufacturers survive the trade war, provided it does not continue for too long, and emerging digital marketplaces like TikTok’s new online shop — combined with the huge network of social media influencers cultivated by Chinese merchants — might drum up enough business to weather the trade war.
Some of the e-commerce merchants interviewed by the SCMP and Washington Post also spoke of finding alternative markets to sell their products, but sprinkled through those Shenzhen interviews were uncomfortable admissions that no one buys like the American consumer, and many of China’s e-commerce enterprises were tailored to meet the eccentric demands of American impulse buyers.
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