By CASEY HALL AND JAMES POMFRET
SHANGHAI- Orders have evaporated for Richard Chen, who manufactures Christmas decorations in southern China for US retailers, including Walmart and Costco facing crippling US tariffs.
“The orders are half of what they were last year,” said Chen, who is based in the manufacturing hub of Dongguan.
He is now in survival mode.
“There’s no more scope to cut prices. But to get orders we sometimes have to take a price cut … we have no choice,” Chen said, declining to elaborate on cuts he had agreed to.
“We’re losing money.”
On February 4, US President Donald Trump applied a new 10 percent tariff to the $400 billion worth of Chinese goods exported annually to the United States, with an additional 10 percent tariff announced on March 4 and further reciprocal tariffs expected on April 2.
Chinese suppliers and their American clients are now coming to grips with the grim reality that this trade war will hit harder than in Trump’s first term in 2018.
This time is different because low-end manufacturers are already struggling with razor-thin margins, so they cannot cut prices to help their US customers, and local Chinese governments that might have provided support to protect jobs are mostly too cash-strapped to give new subsidies.
Suppliers estimate wages have grown by 2-5 percent since the first US -China trade war of 2018, while raw material costs have climbed for some sectors and overseas competition has intensified, making Trump’s latest tariffs the final straw for many low-end manufacturers.
Liz Picarazzi, the Brooklyn-based founder and CEO of trash box company Citibin, said her goods produced in China are now subject to 52.5 percent tariffs and she can no longer afford to manufacture there.
“My whole business has been based on a long-term rate of 7.5 percent. It’s been a real shock,” she said, referring to two rounds of 10 percent tariff increases on Chinese goods in addition to a global 25 percent aluminum tariff.
“We knew this was coming but there’s no way any company can mitigate an additional 45 percent in tariffs.”
US customers are pressing for 10 percent price cuts, according to interviews with 10 Chinese manufacturers and exporters and two US -based retail executives with Chinese supply chain exposure.
Ongoing negotiations are yielding average discounts of 3 percent-7 percent from suppliers, they said.
“You have companies in the US who have hundreds of factories that work for them sending out a mass letter asking for a blanket 10 percent reduction from all suppliers on all products,” said Jonathan Chitayat, the Asia boss of Genimex Group, a contract manufacturer for a range of products that derives 70 percent of its revenue from US customers.
“Most people don’t have 10 percent to give to be honest. Maybe they can do it for one or two orders,
