'Panic and paralysis': U.S. firms fret despite China tariff reprieve
Small US businesses have scrambled to adapt to President Donald Trump's changing tariffs on Chinese goods
By Beiyi SEOW
President Donald Trump's rollercoaster tariff row with Beijing has wreaked havoc on U.S. companies that rely on Chinese manufacturing, with a temporary de-escalation only expected to partially calm the storm, analysts and business owners say.
"The only option is to try to keep your head above water and be tossed by the waves, or to go out of business," said Anna Barker, whose Mississippi-based firm Glo sells luminous toys designed in the United States and made in China.
She told AFP that the 90-day reprieve beginning Wednesday is just a mere "blip on the radar." Placing orders, manufacturing products and shipping them to the United States takes much longer.
Trump's escalating trade war since his return to office saw US duties on Chinese goods -- including toys -- reach a whopping 145 percent, while Beijing's countermeasures hit 125 percent.
The world's two biggest economies however agreed at talks last weekend in Switzerland to temporarily lower the levies, bringing U.S. tariffs down to 30 percent and China's corresponding duties to 10 percent.
While cautiously optimistic about the ongoing negotiations, Barker warned the 30 percent rate remains "massive for a small company."
Trump has argued that companies will enjoy zero tariffs if they manufacture in the United States, overlooking costs for any machinery or raw materials that would still need to be imported.
"We're an American company," Barker said. "Our biggest priority, if it was just up to us, will always be the US market. But it simply can't be right now."
To stay afloat, she is looking abroad for growth.
The pause "may temporarily help unstick" an effective trade embargo since April 9, when steep levies forced many firms to halt imports, said Steve Lamar, president of the American Apparel & Footwear Association (AAFA).
He warned, however, that the residual 30 percent tariff, stacking on duties from past administrations, will "make for an expensive back to school and holiday season."
"The tariffs are still so large that you can't help but pass them along," said KPMG chief economist Diane Swonk.
This means producers, retailers and consumers could all bear some burden, with small businesses hit particularly hard due to their narrower margins.
Freight rates could also surge due to shipping disruptions from the tariffs.
"There's a lot of inventory piling up in factories in China that now need to hit the water," said Josh Staph, chief executive of Ohio-based Duncan Toys Company.
Barker said her company was hurrying to join an "already very clogged pipeline of people racing to shipping ports."
Policy shifts have "triggered both panic and paralysis" among companies, said Swonk.
"Every time they see a window like what we have for 90 days now, they've got to rush," she said. "In that rush, you have a self-fulfilling prophecy that shipping costs are going to go up."
The AAFA's Lamar has called for Trump to strike lasting deals with China and other countries to give businesses more long term certainty.
Without a permanent tariff rollback, the United States will likely continue seeing "depressed investment," said Philip Luck, economics program director at the Center for Strategic and International Studies.
"Firms remain in limbo as they try to plan long-term sourcing and investment decisions," he added.
For Barker's start-up Glo, born of a school project in Mississippi where she and her business partner were college students, the answer for now may be expanding outside the United States.
This means shipping Chinese-made products to countries in Europe or elsewhere, even as it remains based in the southern state with around 30 staff.
"As contrary as it might seem," Barker said, "by shifting our focus international, that is to maintain American jobs."
© 2025 AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Kyodo News
an hour ago
- Kyodo News
U.S., China hold high-level trade talks with rare earths in focus
KYODO NEWS - 17 hours ago - 09:29 | World, All Senior U.S. and Chinese officials met in London on Monday, with a top economic adviser to President Donald Trump expecting the latest round of trade talks to result in Beijing promptly lifting its export controls on rare earth minerals. The second high-level meeting, following mid-May talks in Geneva, took place after Trump and Chinese President Xi Jinping spoke by phone last week, their first known direct communication since the U.S. president's inauguration for a nonconsecutive second term in January. U.S. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer attended the talks, which could also continue Tuesday. The trio met with a Chinese delegation led by Vice Premier He Lifeng, a longtime confidant of Xi who oversees economic affairs. On Monday, Kevin Hassett, director of the National Economic Council, struck an optimistic note about the meeting's anticipated outcome. Hassett said in an interview with CNBC that the talks are likely to end with a "big, strong handshake." "Our expectation is that after the handshake, then export controls from the U.S. will be eased, and the rare earths will be released in volume, and then we can go back to negotiating smaller matters," he said. The 90-minute phone conversation between Trump and Xi on Thursday came after Washington and Beijing exchanged barbs over alleged violations of a preliminary agreement reached in Geneva. Under the deal, the two countries established a 90-day truce in their trade war and committed to stepping back from their respective triple-digit tariff rates. In the days leading up to his call with Xi, the Trump administration expressed frustration over China's slow removal of export controls on critical minerals used in high-tech products, accusing Beijing of failing to uphold the terms of the initial deal. China had criticized the Trump administration for imposing "discriminatory measures," including export control guidance on artificial intelligence chips and the revocation of visas for Chinese students studying in the United States. China's Commerce Ministry said Saturday that Beijing has approved a number of export license applications for rare earth-related items, citing global demand from industries such as robotics and new energy vehicles. However, it did not provide further details. China mines about 70 percent of the world's rare earths that are used in the production of smartphones, personal computers and vehicles. As part of retaliatory measures against high U.S. tariffs, Beijing in April introduced export controls on seven types of rare-earth minerals. Amid a tit-for-tat tariff war, Chinese exports to the United States in May fell 34.5 percent from a year earlier to $28.8 billion, while Chinese imports from the country dropped 18.1 percent to $10.8 billion, customs data of the Asian powerhouse showed Monday. Related coverage: Japan's top negotiator eyes U.S. trip this week for 6th tariff talks Japan, EU eye launch of "competitive alliance" scheme to boost trade Xi, Trump agree to new round of Sino-U.S. trade talks
Nikkei Asia
2 hours ago
- Nikkei Asia
Trump's first 'Made in the USA' triumph won't be the iPhone
TAIPEI -- At Foxconn's manufacturing hub in Houston, Texas, hundreds of construction workers and engineers are working tirelessly to expand the Taiwanese company's capacity for building artificial intelligence servers in the U.S. The key Nvidia supplier is undertaking this massive expansion to produce a significant proportion -- in the double digit percentage range -- of its graphic processing unit (GPU) modules and GPU board on American soil, Nikkei Asia has learned. It currently makes more than 90% of these critical components in Taiwan.
Japan Times
5 hours ago
- Japan Times
World Bank slashes global growth forecast as trade tensions bite
The World Bank on Tuesday slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3%, saying that higher tariffs and heightened uncertainty posed a "significant headwind" for nearly all economies. In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70% of all economies — including the United States, China and Europe, as well as six emerging market regions — from the levels it projected just six months ago before U.S. President Donald Trump took office. Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective U.S. tariff rate from below 3% to the mid-teens — its highest level in almost a century — and triggered retaliation by China and other countries. The World Bank is the latest body to cut its growth forecast as a result of Trump's erratic trade policies, although U.S. officials insist the negative consequences will be offset by a surge in investment and still-to-be approved tax cuts. The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5%, the slowest pace of any decade since the 1960s. The report forecast that global trade would grow by 1.8% in 2025, down from 3.4% in 2024 and roughly a third of its 5.9% level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10% U.S. tariff on imports from most countries. It excludes increases announced by Trump in April and then postponed until July 9 to allow for negotiations. The bank said global inflation was expected to reach 2.9% in 2025, remaining above pre-COVID levels, given tariff increases and tight labor markets. "Risks to the global outlook remain tilted decidedly to the downside," the bank wrote. It said its models showed that a further 10-percentage point increase in average U.S. tariffs, on top of the 10% rate already implemented, and proportional retaliation by other countries, could shave another 0.5 percentage point off the outlook for 2025. Such an escalation in trade barriers would result "in global trade seizing up in the second half of this year ... accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets," the report said. Nonetheless, it said the risk of a global recession was less than 10%. 'Fog on a runway' Top officials from the United States and China are meeting in London this week to try to defuse a trade dispute that has widened from tariffs to restrictions over rare earth minerals, threatening a global supply chain shock and slower growth. "Uncertainty remains a powerful drag, like fog on a runway. It slows investment and clouds the outlook," World Bank Deputy Chief Economist Ayhan Kose said in an interview. But he said there were signs of increased dialogue on trade that could help dispel uncertainty, and supply chains were adapting to a new global trade map, not collapsing. Global trade growth could see a modest rebound in 2026 to 2.4%, and developments in artificial intelligence could also boost growth, he said. "We think that eventually the uncertainty will decline," he said. "Once the type of fog we have lifts, the trade engine may start running again, but at a slower pace." Kose said while things could get worse, trade was continuing and China, India and others were still delivering robust growth. Many countries were also discussing new trade partnerships that could pay dividends later, he said. U.S. growth forecast cut sharply The World Bank said the global outlook had "deteriorated substantially" since January, mainly due to advanced economies, now seen growing by just 1.2%, down half a point, after expanding 1.7% in 2024. The U.S. forecast was slashed by 0.9 percentage point from its January forecast to 1.4%, and the 2026 outlook was lowered by 0.4 percentage point to 1.6%. Rising trade barriers, "record-high uncertainty" and a spike in financial market volatility were expected to weigh on private consumption, trade and investment, it said. Growth estimates in the euro area were cut by 0.3 percentage point to 0.7% and in Japan by 0.5 percentage point to 0.7%. It said emerging markets and developing economies were expected to grow by 3.8% in 2025 versus 4.1% in January's forecast. Poor countries would suffer the most, the report said. By 2027 developing economies' per capita GDP would be 6% below pre-pandemic levels, and it could take these countries — minus China — two decades to recoup the economic losses of the 2020s. Mexico, heavily dependent on trade with the U.S., saw its growth forecast cut by 1.3 percentage points to 0.2% in 2025. The World Bank left its forecast for China unchanged at 4.5% from January, saying Beijing still had monetary and fiscal space to support its economy and stimulate growth.
