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The Xiangguang Hats company from China’s southern Guangdong province is one exporter able to expand beyond the U.S. market.
It started when President Donald Trump imposed tariffs on certain Chinese exports in 2018 during his first term. Xiangguang’s hats, which include baseball hats, trucker hats and cartoon bear hats with floppy ears, faced an extra 20% duties. Back then, 40% of Xiangguang’s sales were to the U.S. “But now, we sell mainly to South Africa, to big brands like supermarkets. So, our sales to the U.S. have dropped a lot — to about 15%,” Xiangguang owner Wu Qizhen told Marketplace at a recent Shanghai trade show. The U.S. remains a major destination for Chinese exports but the market has been shrinking from
19% in 2018 to just under 15% last year.
Trade between the two countries is set to go down further. At the start of Trump’s second term, the president imposed sky-high tariffs on Chinese exports of 145%. The two sides have agreed to take a temporary pause
while they hammer out a trade deal. The U.S. tariff rate on most Chinese goods has been temporarily reduced to 30%, plus existing duties. At the same time, China cut its retaliatory tariffs on American exports from 125% to 10%. This is on top of the 10% to 15% retaliatory duties on American products, such as coal and agricultural goods.
Throughout this trade war, the Chinese government’s message to its own exporters has been that U.S. tariffs on Chinese products will hurt but “the sky won’t fall.” Chinese officials have encouraged manufacturers to sell to other countries or to the domestic market.
However, pivoting away from the U.S. market doesn’t work for every Chinese product, according to Cameron Johnson, a Shanghai-based supply chains expert with Tidalwave Solutions. He said while the share of Chinese exports headed to the U.S. is going down, China’s trade with neighboring Southeast Asia is up.
“A lot of it is Chinese companies and firms who moved supply chains or factories from China to Southeast Asia to supply the U.S. market,” Johnson said. He said China exports raw materials and components to Southeast Asia because the Chinese dominate the entire supply chain. Then Southeast Asian factories manufacture the products for the U.S. “All you need to do is look at Apple and the iPhone or the MacBook, and regardless of the fact that it's made in Vietnam or India, most of those parts come from either China or Taiwan … and they're just merely assembled,” he said. | 
