World News

Small businesses in China threatened by proposed US tariff

Published on: March 20th, 2017

CHINA1012A proposed levy on Chinese products imported to the US would pose a considerable risk for mid-sized Chinese firms reliant on US trade.
According to Bloomberg News, a proposed levy on Chinese products imported to the US could reach as much as 45%, which would pose a considerable risk for mid-sized Chinese firms reliant on US trade. Factories in China already face higher costs and tighter regulation, and are struggling to withstand China’s rising wages, social-insurance mandates and tighter environmental-protection laws
Thousands of small- and medium-sized factories in China face this predicament, with some owners considering shutting down or selling out if the levy is introduced. Many toy factories contribute to the $462.8 billion annual flow of exports to the US but aren’t cash-rich, and so are unable to absorb the effects of the tariff or pivot their operations elsewhere. Smaller companies would be the most exposed.
Lung Cheong Group, a supplier for Hasbro, has already moved almost all production lines to Indonesia to escape China’s higher costs, chairman Lun Leung said. 70%  of the group’s revenue comes from US based customers.
“Even a 10% tariff increase will make it difficult for Chinese factories to cover their costs,” Leung said. “If they stay, they just plan to sell their factories at a good price and end their businesses.”
A tax at the top end of Trump’s campaign proposal may trigger an 87% decline in Chinese exports to American consumers, Kevin Lai, the Hong Kong-based chief economist for Asia at Daiwa Capital Markets, estimated.

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