wThe $3,500 merchandise from Hen Itay Sharon arrived at U.S. ports on May 13, and the cargo suffered an astonishing 170% tariff, or close to $6,000. This is the result of President Donald Trump's "countdown" tariffs on China since April 2, which are as high as 145%, except for the 25% tariff on certain commodities since his first term. But if the goods arrive in a day, it will face a 55% tax, or less than $2,000.
Sharon sells biodegradable and compostable garbage bags, diaper bags, wipes and pet wipes on Amazon in the US and UK, and he has not decided to transfer these costs to consumers at a higher price, if his long-term costs are higher, or if he should be higher, or if he should be higher, then it would be a bonus if the price would rise again. The problem is: no one knows what will happen next. “Uncertainty makes it very difficult to do business,” Sharon told Time.
Trump shocked leaders, economists and businesses around the world when he imposed a series of so-called "reciprocal" tariffs on imported goods in almost every country in the world, some as high as 50%. However, just a week later, he announced a 90-day pause to allow negotiations on trade deals, while most commodities temporarily lower interest rates in each country to 10%.
Apart from China: The two countries embarked on an escalating tariff war, with tariffs on China as high as 145% in a few weeks, while tariffs on U.S. imports rose to 125%. Trade tensions between the world's two largest economies mean that in weeks, many cargoes from China to the United States were stopped and the ports were emptied. But after talks in Geneva last weekend, the United States and China have a truce: starting on May 14 and lasting for 90 days, U.S. tariffs on most Chinese goods will be reduced to 30%, while China will lower its tariffs on U.S. imports.
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But for many companies relying on Chinese manufacturing, serious tariffs have caused some losses, and uncertainty about what might happen in three months has caused companies to try to adapt to fluctuating policy situations without knowing exactly what they are ready for.
Some people are eager to take advantage of rollbacks through forward loading and stock goods. In the days after the truce announced, container bookings in China soared nearly 300% on U.S. routes, especially as businesses anticipate year-end holiday shopping demand.
"Many retailers have stopped or cancelled shipments before the announcement was announced," Jonathan Gold, vice president of supply chain and customs policy at the National Retail Foundation, told Time. "They are now working with suppliers to quickly increase orders for arrivals before the end of the 90-day truce. Currently, it is the busiest time of the year for retailers who are placing orders for the most important fall and winter seasons."
Peter Sand, chief analyst at Xeneta, a marine and air freight rate analysis platform, said he didn't know what would happen next. But when the tariffs were first announced, several major container lines were moved away from the Pacific due to a drop in demand, so it would take weeks to redeploy them from other routes to the Chinese US route. Sea transportation from China to the United States usually takes two to five weeks, which is a timeline, which makes it difficult to change routes quickly.
"Big companies are ready for such fluctuations, which is simply due to the size, and it is also because they may be able to absorb some higher tariffs better than smaller moms and popular stores," Sand said. "When large companies are anxious to ensure freight, small and medium-sized companies may also have to "fight for what's left in terms of capacity on board. Not only is this a tax rate, but the big companies there have lower freight rates, and smaller freight rates will often see something higher."
Storage is not an option for many smaller companies. Anna Griffin, who owns a small Atlanta-based business selling luxury paper products that have been sourced from four factories in China since 2001, told Time that she could not import stocks for more than a few months because her merchandise was designed by her company and sometimes customizable. Sharon also said it would make no sense for his business to stock up on stockings and have to pay potentially high storage costs.
But even for large corporations, Donald Low, an economist at the Institute of Public Policy at the University of Science and Technology of Hong Kong, told Time that inventory is just a "stagnation measure." Lowe said it was impossible to make such "significant, expensive, sticky" business decisions in this 90-day window, such as transferring the Trump administration's ostensible production to China.
"When a company relocates, it's not a decision they make easily. It's something that requires a lot of planning, financial investment and reconfigure logistics arrangements. It's not something that's done in a few weeks or months," Low said. "If you only have a 90-day window and you don't know what will happen afterwards, why make any decisions?"
Why is it not that easy to relocate
“The last seven weeks have felt like seven years to me,” Griffin, a small business owner, told Time.
Griffin spent weeks following Trump's initial tariff announcement, focusing on shifting production from China. But she said: “We immediately realized with higher costs and an incredible learning curve that our quality is not going to happen in the first year of the transition, and that’s where we can get space for production” as thousands of other businesses are also considering transferring production to factories in other countries.
Ash Monga, who runs IMEX Procurement Services, a supply chain management company based in China, said most factories in other countries also have higher minimum order volumes than China, and they usually do not have the same infrastructure, making China such an efficient manufacturing environment.
"China has always been the manufacturer of the world, they are experts," Griffin said.
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“It’s been a long process,” Monga said of diversified supply chains. In most cases, especially for complex products or companies that have not started before the tariffs, it will take several months if not years. The process usually involves talking to multiple factories, negotiating prices and ordering and making samples (depending on the complexity of the product, multiple feedback can be taken - and eventually being able to start production for sale. Monga said of the speed at which Chinese factories are able to go through the process and anywhere else, "China time" is different. "China has been doing it for so long, and over time they have evolved and become very, very efficient."
Griffin also considered moving production to the U.S., but after talking to multiple printers across the country, she said she found that no one was able to produce stickers of the same quality or even type as made in China. "Not only can they not do this, but they are more than 200% of the cost we are currently paying," she said, and even higher than the highest tariffs paid for imports from China.
"I don't think small businesses can change over a dime and find anywhere in the world," she said. "In infinite moments, this happened to avoid business disruptions." Griffin was recently able to transfer some production to a factory in Malaysia that is run by the same directors as the ones that work with China, but most of her production is still in China.
Salons, which work with factories in China and Vietnam, also consider transitioning to production in the United States, but in addition to possible increased production costs and higher minimum order quantity, he found that our plants were slow to respond at critical moments to his business. "In this case, I can't work with them," he said.
"The threat currently under is the backbone of the U.S. economy, and whether we like it or not, hiring small businesses that people have to absorb these tariffs," Griffin said. "It's not about making manufacturing in the U.S., and that's it: I can't, we can't."
Tariff uncertainty may even bring businesses to China
Over the past decade, more and more companies have begun adopting a "China plus one" strategy, where companies diversify their manufacturing and procurement to include mitigating trade risks in operations in at least one other country outside of China. Low said the effort further boosted the impact of Covid-19-19 on global supply chains. "For many companies that produce in China that serve the world, there is a need for more resilience than focusing on efficiency," said Luo.
Lowe said Trump's global "reciprocity" tariffs show that "not only decoupling China, but also efforts from the rest of the world." Potential beneficiaries of "China plus one" such as Vietnam, Cambodia and Malaysia were also initially hit by punitive tariffs, and it is not yet certain what ratio they will eventually face after a 90-day rollback.
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Despite some short-term relief from Trump’s trade war ceasefire, Lord also said: “Confirm the company’s concerns that these decisions are temporary, and soon lasting, just arbitrary that is easily reversed.
The result may actually mean more companies staying in China, where production standards are high, costing other than tariffs is low, while waiting for longer-term policy clarity.
“Now that diversified brands from China have begun to fall into the mid-term, and it’s not sure whether to double or retreat,” said Rachel Kibbe, founder and CEO of Cycle Textiles in the United States, a coalition of industry leaders advocates for a more resilient domestic supply chain.
"At best, it creates uncertainty, and at worst, it may actually reverse the trend of "China plus one" to move some production facilities from China to China, because given the uncertainty, companies will only stick to the status quo until things get clearer."
"The market is indeed adjusting toward policy uncertainty in the Trump administration," Sand said. "The business environment here is very toxic for anyone working in the supply chain, predictability, reliability and resilience are the keywords."