China Yiwu - November 26: Foreign customers select holiday products at China Yiwu International Trade City in Yiwu, China on November 26, 2024.
Hu Xiao/vcg by Getty Image
Christmas merchandise has been on the shelves on U.S. shelves for years as retailers try to capitalize during profitable holiday seasons, a retail phenomenon known as “Christmas creep.”
However, tariffs could be a disruption to the Grinches of the year-end celebrations, as Chinese factories and their U.S. buyers can lead to tariff uncertainty to ensure shelves are stored in time during Christmas.
According to CNBC interviews, U.S. President Donald Trump announced a comprehensive tariff (including a 34% tariff from China imports, which was later raised to 145% - many U.S. retailers responded by halting orders from Chinese suppliers, forcing factories to suspend production.
But industry representatives say some output has restarted over the past few days as people have exceeded the uncertainty of tariffs about business disruptions and missed opportunities.
"If you don't start production in the next few weeks, you'll start missing Black Friday and Christmas," Cameron Johnson, a climax senior partner at Shanghai consulting firm Tidalwave Solutions, said in a phone interview Tuesday.
“Both sides are trying to be flexible to some extent,” he said. “Retailers are beginning to realize whether these supply chains are stopped and it will be more difficult to get them up and running (again).
Johnson described, for example, how to stop in an order to make a spoon in a factory that affects rolling steel as well as iron ore smelters. "These supply chains themselves, upstream, are also starting to close. If they are closed, it will take time (restart) even if we have some kind of deal."
Despite some improvements to Chinese-made goods through other countries, it is difficult to replace existing supply chains and transportation plans overnight. According to Goldman Sachs analysis, 36% of imported from China in the United States, only more than 70% can come from mainland suppliers.
For example, considering that after the Thanksgiving holiday at the end of November, electronic products need to be shipped from China by early September, with the consideration of customs and distribution chains. The Guangdong-based company offers half of its products to the U.S. market.
Anjoran said it would take about six months to manufacture, test, assemble and pack, meaning suppliers should ideally start preparing for these orders in March.
Many U.S. buyers have started stockings since the second half of last year, with higher tariffs expected when Trump returns to the office. According to CNBC's calculations of official customs data, China's exports to the United States increased by 9.1% as the pre-load continued, while imports from 9.5% from the year. April trade figures are expected to be released on May 9.
But those preload jobs have begun to decrease. According to Morgan Stanley's tracking of high-frequency transport indicators, the number of freight container ships departing from China to the United States has dropped sharply in recent weeks. The investment bank said canceled goods also soared 14 times in the four weeks from April 14 to May 5 compared to the period from March 10 to April 7.
In April, a series of new export orders for Chinese factories fell to their lowest levels since the end of 2022, according to data from the National Bureau of Statistics.
"Currently, we don't have a lot of U.S. customers in the next few months," Anjoran said. Most of his customers have stocked up on stock, which has been shipped to the U.S. by the end of January before the Lunar New Year, with some orders dripping in March and April.
Ryan Zhao, director of Jiangsu Green Willow Textile, told CNBC that some U.S. buyers are waiting to see if tariffs will return to more acceptable levels in May. Currently, the company has suspended orders for its U.S. customers.
Recent reports indicate that there are some tariffs on the ground when two governments try to cover up the economic impact of punitive tariffs. China reportedly imposes tariff exemptions on certain U.S. goods, including imports of drugs, aviation equipment, semiconductors and ethane.
In the latest relief, Trump signed an executive order exempting foreign cars and parts from imports from additional taxes, after rolling up tariffs on a range of electronic products, including smartphones, computers and chips.
Despite concerns about margins, some businesses hedge their bets by partially supplementing Chinese orders rather than enduring empty store shelves, said Johnson of Tidalwave Solutions.
"Some factories told me that some U.S. importers have instructed them to resume production to "try to'an expected tariff cuts," Martin Crowley, vice president of product development at Toysmith, a Seattle-based wholesale toy seller. "The company's website urges customers to place orders by May 16 for shipments by July 31, "locking to current, irrelevant pricing."
Crowley added that over the past few days, many factories in Yiwu, Shantou and Dongguan manufacturing centers have obtained licenses to resume production from Walmart and Target. Walmart and Target did not immediately respond to CNBC's request for comment.
Some Agilian customers have also placed relatively small orders, betting that tariff rates will be lowered when their products arrive at U.S. ports.
But if the U.S.-China trade negotiations make a breakthrough and are rushing to backfill orders, this could boost production costs and shipping prices at the factory.
"If the quantity is not large, you may be rushing to arrange production speeds ... But if all the U.S. customers are rushing at the same time, the factory will be overwhelmed and air freight will be very expensive," Anjoran said.