00:37 GMT +320 July 2018
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    Chinese Exporters Unwilling to Abandon US Market Despite Steep Tariffs

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    MOSCOW (Sputnik), Tommy Yang - Facing harsh tariffs of 25 percent when exporting to the United States, Chinese exporters are not ready to give up on the US market completely and remain hopeful that they can work with their US clients and adapt to the difficult reality.

    The highly anticipated trade war between China and the United States went into full swing on Friday, when US Customs started to charge 25 percent import duties on 818 types of Chinese products valued at $34 billion, following the decision announced by the Office of the United States Trade Representative (USTR) in June. The USTR also plans to impose the same 25 percent import duties on additional 284 types of Chinese products with an approximate value of $16 billion in the near future, after completing further reviews.

    High-Quality US Clients

    Taizhou Eternal Hydraulic Machine Co. in Eastern China’s Zhejiang province happens to be one of the Chinese exporters subject to the new stiff tariffs in the US market, as its key product is electric motors, which falls under the 818 types of targeted products.

    With about 20 percent of the company’s annual revenue of around $8 million coming from sales to clients from the United States, it’s impossible for the company to simply quit the US market, the firm’s general manager Leo Wu told Sputnik.

    "It’s unrealistic for us to give up on the US market. It’ll be a very difficult situation for us. The United States has been a very stable market for my company and we have established a lot of long-term customers over the years. We still prefer to work with them, if we still have a chance to, because it takes time to develop new customers," he said.

    READ MORE: China to Back Europe in Trade War with USA — Analysts

    Other Chinese exporters explained why they prefer to do business with US clients, compared to clients from the emerging markets.

    "To be honest, it’s much easier for us to communicate with customers from the United States because they’re not as focused on getting cheaper prices as other clients from the developing countries. They usually don’t try to bargain repeatedly for a lower price, after quoting a price from us. I can say US clients are much more candid," Nancy Fan, a sales manager at Wuxi Nengli Bearing Company Limited in Eastern China’s Jiangsu Province, told Sputnik.

    Fan’s company specializes in exporting various kinds of bearings, which are also covered in the 818 types of targeted Chinese products. About 20 percent of her company’s annual sales come from the US market.

    Price Cut Impossible

    Despite planning to continue to do business with US-based customers, Fan from Wuxi Nengli Bearing Company Limited said it was impossible for her company to cut prices to share the burden from the tariffs hike with its US clients because the profit margin is too low.

    "Regarding the 25 percent tariffs, we can only continue to offer the prices we can afford to our US clients. There’s not much we can do to help them. They need to find solutions on their own. In today’s international trade, the profit margin has become very transparent. It’s not like the high-profit margin from many years ago. It’s impossible for us to cut our prices, as we are already offering very low prices on our orders. Our average profit margin is only about 5-10 percent today," she said.

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    According to Fan, her US clients have not demanded lower prices, but also have not made inquiries on new orders.

    "They’re probably still holding out and see how long the new tariffs will stay in place, to decide if they need to buy from other Asian countries," she said.

    Jiang Guocheng, general manager of Ningbo Steedtools Corporation, which relies on the US market for over 50 percent of its annual sales, expressed his frustration over the harsh tariffs from the United States.

    "Talking about responses [to the new tariffs], there’s not really much we can do. The situation cannot change according to our will. We definitely will continue to communicate with our US clients. But our bottom line is that it’s impossible for us to offer a price that doesn’t generate any profit. If we sell at a price that loses money for us in the end, how can our company survive?" Jiang told Sputnik.

    Key products from Jiang’s company, such as power drills and hammers, will also face the 25 percent import duties in the US market.

    No Exception

    Wu from Taizhou Eternal Hydraulic Machine Co. remains hopeful about his company’s chances in the US market, in face of the new tariffs.

    "The tariffs are implemented across the board, without targeting a specific company. Maybe there will be difficulties in the next few months. But after that, the business has to continue. Every Chinese exporter who wants to do business in the US market faces the exact same problem. Even if we need to make some adjustment to our prices, we can continue to do business with our US clients as long as it’s profitable for us," he said.

    READ MORE: China Trying to Shield World Economy From Dangerous US Attacks — Analysts

    As US President Donald Trump started to make threats to slap harsh tariffs on Chinese products in March, Wu’s clients from the United States even placed more orders in the first half of this year, to boost their inventory in anticipation of the tariff hike.

    The Zhejiang-based Chinese exporter even saw a silver lining from the new tariffs in the US market.

    "In my business, many of my US clients are second-hand resellers, who slap their logo on our products and then export to other markets, such as South America. After the tariffs hike, the margins will be greatly reduced when selling to customers from South America, who may decide to buy from me directly," he said.

    READ MORE: The Consequences of the Kim-Trump Deal for Other Asian Countries

    In response to new US tariffs, China imposed retaliatory duties on US products with a matching $34 billion value on Friday, the Chinese customs said in a statement. Chinese authorities vowed to introduce reciprocal measures if the Trump administration decides to escalate ongoing trade tensions.

    The views and opinions expressed by speakers do not necessarily reflect those of Sputnik.

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