Beijing/Hong Kong (Reuters) - Jeremy Fang, a sales officer for Chinese aluminum products manufacturer, is trying to export more to markets in Asia, Africa and Latin America to offset the impact of U.S. tariffs. The problem, he said, is that his competitors have the same idea.
"It just leads to crazy rat races," Fang said. His company has to lower prices and accept lower margins. "The cake is only that big. We all want to grab a piece of cake so the game will get intense."
The trade war between Washington and Beijing, escalating this month with U.S. President Donald Trump, imposing 10% tariffs on Chinese goods as an "open salvo" that could bring to the rest of the world New supply shock.
Chinese producers face weak demand in the United States, selling more than $400 billion in goods in the United States, with no choice but to rush to alternative export markets at the same time.
However, no other country is even close to the U.S.’s consumption capacity, greatly limiting the output the rest of the world can absorb from the second largest economy.
If smaller profit margins lead to job losses, reduced wages and investments, it will intensify the price war between Chinese exporters, squeeze their profitability, while also risking further political rebound and fanatical communication power.
Frederic Neumann, chief Asian economist at HSBC, said market diversification is an understandable but unsustainable strategy.
"One risk is that every Chinese exporter suddenly wants to develop the same other markets," Neumann said.
"But the real risk is that the recipient countries may eventually be forced to put restrictive measures against China because their own producers are under pressure."
Tensions are already high. Over the past year, the EU has increased tariffs on Chinese electric vehicles, while India, Indonesia and other emerging markets have raised their own trade barriers to certain Chinese products.
China is a strong competitor to certain sectors. Major electric vehicle manufacturers such as BYD or DeepSeek's AI platform have already made their mark on the global stage.
“We have a very strong supply chain system,” making schoolbags in China, talking about teddy bears, stationery and consumer electronics, investing 30-40% in advertising and business development in Europe and Asia.
“From an idea to mass production, everything is very fast.”
But smaller companies are worried about survival.
Richard Chen, who owns a Christmas decoration factory in southern China, said he has little profit margins and is not sure if he can keep 80 employees this year.
"We tried to get into Poland, but they didn't buy anything like the American customer at all," Chen said. "It's the worst thing ever."
Ripples in the home
Price wars abroad may accelerate deflation at home.
The manager of a bathtub factory in Shijiazhuang, about 300 kilometers (190 miles) south of Beijing, said he was trying to sell more in Brazil and Argentina to ease the impact of the 35% tariff he faces in the United States after his latest hike.
He said U.S. retailers put pressure on him to cut prices by 10%, but he was hesitant and had cut wages by 10-15% to remain competitive.
The manager said: "There are many foreign Chinese businessmen in the same industry. It's so difficult for everyone.
Li Yongqi, manager of Jialifu electric vehicle company, sells most sales in China, but expects wages and job losses at other factories and the ongoing real estate crisis in China to narrow demand at home and cut it to 20% his profits make up -30 %.
"Chinese companies in every industry are abroad, rushing to overseas markets, and then foreign governments are imposing tariffs and sanctions," Li said. "Most of these factories are reducing workers to reduce costs."
The Politburo, the top decision-making body of the Communist Party, called on the industry to avoid disruptive competition last year. Chinese solar panel manufacturers have urged government intervention to curb overproductive glut.
Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, said China's only way out is to produce less.
"It's going to be very painful," she added. "No one will always take your product. So it's just an option: If you want to create more benefits, more growth, then you need to spend more." ”
Neumann of HSBC said policies that promote household consumption could also benefit internationally.
"At the end of the day, it's about reducing trade frictions with the rest of the world...it also involves domestic demand to help absorb some production," Neumann said.
(Reported by Ellen Zhang and Laurie Chen in Beijing; James Pomfret in Hong Kong; David Kirton in Shenzhen; graphics by Kripa Jayaram; edited by Marius Zaharia and Sam Holmes)