Simply because the price of Chinese goods is too cheap for other countries to compete.
According to Bloomberg news agency, that was the dominant view at the Canton Fair that took place in China this April. This is China’s largest trade event, held annually in Guangzhou city. Many buyers and sellers at this year’s fair appeared unconcerned about the risk of an escalating trade war.
“50% TARIFF ALSO WEAR”
“My customers say that even a 50% tariff won’t make them stop buying from us,” said Jack Jin – a supplier of goods control tools and truck components from the Southeast. China – said. Jin revealed that half of his orders come from American customers – who can sell products purchased from Jin at a price four times higher than the purchase price.
Tensions between China and its trading partners escalated this year – the year of the US presidential election. This increase in tensions comes amid accusations that China – the world’s largest producer of goods – is dumping goods and unfairly subsidizing domestic industries. The list of products targeted by these allegations is getting longer and longer, including metals, ships as well as electric cars.
Mr. Trump has said he may impose tariffs of more than 60% on all goods from China into the US. President Joe Biden – Mr Trump’s opponent in the November election – last week pledged to triple tariffs on Chinese steel, a product that emerging economies have also expressed concern about. hesitate. The European Union (EU) has launched an investigation into China’s subsidies for the electric car industry, which could lead to the imposition of tariffs in a few months. In addition, the EU is also scrutinizing China’s solar and railway industries.
However, traders at Canto Fair said the world still needs Chinese goods no matter what. They are looking for ways to circumvent tariff barriers. And even customers looking for alternatives in the supply chain say that China will still be their largest source of goods, because other countries cannot keep up with China in terms of quality and quantity. expense.
Mr. Samuel Jackson, who came to Canton Fair this time as a buyer for a Bosnian furniture company, said he could buy products of “very, very similar” standards for the same price. half the price offered by European manufacturers. He said tariffs could have some impact, “but China is such a big country. They have other countries to sell to.”
According to Alex Student, an auto parts importer from California, it is American consumers who bear the burden of tariffs on goods made in China. He said when Mr. Trump imposed tariffs on Chinese goods during his previous term, US retailers refused to pay higher prices, instead asking him to ask Chinese suppliers to pay higher prices. produce a cheaper version of the product.
“Who ultimately pays the tariffs? Consumers, not anyone,” Mr. Student said. “Consumers will have to accept poor product quality, or pay more to buy products with the same quality.”
Mr. Student revealed that one way for him to compensate for goods imported from China being subject to tariffs is to calculate the FOB price (Free On Board – the price of goods paid to the seller is calculated at the export port, excluding insurance fees). and freight). This means that logistics and storage costs will be paid by US customers, leading to a decrease in the price of goods used to calculate tariffs.
“There are many ways to avoid tariffs,” Mr. Student said.
CONTINGENCY PLAN
Chinese goods are cheap even for buyers from underdeveloped countries. Mr. Daniel Lulandala, owner of a machinery business in Tanzania, made his first trip to China and was very excited to be able to negotiate directly with local manufacturers.
The prices of goods at Canton Fair were so low that it made Mr. Lulandala think about expanding his business. He is planning to open a factory in Tanzania to produce children’s puzzle toys, using Chinese machinery that costs about $8,000. He believes he can make that money back in just 3 months.
“If I had come here a few years earlier, I would have been at a higher level now,” Lulandala said.
According to organizers, of the 125,000 foreign buyers attending the fair, which lasted until April 19, only 18% came from the US and Europe. That’s not just because of rising trade tensions, but also because relationships with those economies have long been firmly established and the buyers are often larger customers. Two-thirds of the fair’s attendees were from most of the emerging countries included in China’s Belt and Road infrastructure plan, up from about half a decade ago.
The low cost of Chinese goods impresses foreign buyers, but it is also a sign that demand in the country is weak as households are reluctant to spend amid the real estate crisis. Prolonged unemployment caused the world’s second largest economy to fall into deflation. Shifting to boost exports may help China achieve its growth target of about 5% this year, but on the other hand affects its long-term strategy of strengthening the role of consumers in economic growth. .
Mr. Jin, who sells truck parts, admitted to being “a little” worried about Mr. Trump – a candidate he believes is more unpredictable than Mr. Biden. He is also aware of growing competition from other emerging countries. His company stopped making metal rings for trucks because Indian manufacturers could offer lower prices due to tax breaks.
Student said he has begun making “contingency plans.” His company imported some goods from Vietnam last year – marking the first time it purchased from sources outside of China since the 2000s. It is also currently reviewing some products. certain in Thailand and Indonesia.
However, according to Mr. Student, these countries still have a long way to go before they can compete with China. Therefore, even in the “worst scenario”, China will still likely receive about 75% of his company’s orders. “I cannot foresee a lower number,” he said.
