Chinese factories rush to reduce reliance on Donald Trump’s US

Chinese manufacturers are racing to find buyers at home and abroad as trade tensions with the US threaten their single largest export market.

Chinese trade data released since US President Donald Trump announced high tariffs in April shows increased exports to alternative markets partially offsetting a plunge in US-bound shipments.

The value of exports to Europe in May climbed 12 per cent from a year earlier, with shipments to Germany up 22 per cent. Exports to south-east Asian countries rose 15 per cent.

Analysts said China’s manufacturers would be able to make up in other markets at least some of the sales lost because of US tariffs, helping to ensure exports remain a pillar of a national economy still struggling with a property sector downturn and weak consumer confidence.

“Consumption is weak and there’s less driving the economy on that front,” said Leah Fahy, China economist at Capital Economics. “China’s still going to have to export all this stuff, so it’s going to have to go to other countries and they’re going to face a surge in Chinese imports.”

Manufacturers’ efforts are on display in Zhejiang, China’s second-biggest exporting province, where many factory owners are urgently shifting focus towards trading partners that look more stable than the US, or to the large but fiercely contested domestic market.

“We want to find new customers in markets like Europe,” said Xia Shukun, a manager at Shaoxing Sulong Outdoor Technology, which until now has only exported to Asia and the US.

Xia said a Norwegian buyer had recently toured their factory, where the screech of blades slicing metal for camp stoves reverberates across three floors, raising hopes the company might win its first customer in Europe. “We’re very eager — we can make anything,” Xia said.

With average US tariff rates on Chinese goods still above 50 per cent, and the possibility Trump will reimpose sky-high rates that would make most trade unviable, factory owners and managers up and down the Zhejiang coast said they were looking for new markets.

Chen Zebin, whose family runs nail lamp manufacturer Shaoxing Shangyu Lihua Electronic Technology, said the proportion of its output going to the US had fallen to about 30 per cent this year from 60 per cent in 2024, prompting it to shift to more domestic sales, where margins are thinner.

Chen said orders from the US were slow despite a trade war truce between Washington and Beijing. “That road isn’t working so we need to find a new one,” he said, adding the company was exploring online sales channels, such as Temu, and seeking customers in new markets, including the Middle East and Europe.

Doris Xia, a manager at Zhejiang-based Kimo said the power tool manufacturer was prioritising expansion in Europe, Russia and south-east Asia after getting a cool reception at a trade show in Las Vegas event in March, when Trump had only imposed an extra 20 per cent tariff.

“Basically no customers came over to us,” Xia said.

After the US, the top destination of Chinese exports by value last year was the EU, followed by Vietnam — where many goods are processed for re-export — Japan and South Korea.

The European Commission is trying to track and counter any surges of Chinese imports. Its first surveillance report found sudden increases in imports of products ranging from guitars to industrial robots, with China indicated as the biggest source of the surges.

“We are seeing a new ‘China shock’,” said commission president Ursula von der Leyen at the G7 gathering in Canada this month. “As China’s economy slows down, Beijing floods global markets with subsidised overcapacity that its own market cannot absorb.”

Pencil Chu, who works with companies exporting through Chinese ecommerce giant Alibaba, said factories that relied on the US for a relatively small portion of their business were simply “cutting it off”.

“They want stability and in the long term it doesn’t look good,” Chu said. “Many factories are concentrating on Europe.”

Beach umbrella maker Ewing Tourism Products, which sold most of its products to stores such as Lidl and Ikea in Europe even before Trump’s tariff blitz, is starting to be hit by a flood of products offered by previously US-focused Chinese rivals. 

“European buyers have too many factories to choose from, it’s driving prices down,” said Vera Wu, the company’s 45-year-old founder. “This is the toughest year yet.”

With Zhejiang’s annual exports worth about $550bn, second only to southern Guangdong, leaders of the province are keen to help its 100,000 manufacturers weather the tariff turmoil.

The provincial government has begun covering the cost of attending trade fairs abroad, rolling out language programmes to cultivate 100,000 new cross-border ecommerce sellers and increasing subsidies for export credit insurance.

The Zhejiang city of Cixi, billed as China’s “home of bearings”, offers some comfort to factories now attempting to pivot from the US.

Cixi locals say some bearings plants closed after Trump hit them with a 25 per cent tariff in his first term. Chinese customs data shows bearings exports to the US have fallen 25 per cent since 2017.

But city streets are still lined with bearing factories. Wang, a manager at a 40-worker bearing factory manager who asked to be identified only by his surname, said that back in 2018 he was closely following the trade news out of Beijing and Washington.

Now, with boxes full of bearings destined for Indonesia and the Philippines stacked by his factory door, Wang is much less concerned.

“The signal was clear, US-China relations were chaotic . . . We found new buyers in south east Asia,” he said. “This time, I’m not paying attention.”