The World’s Supermarket Crushed by Tariffs! Yiwu, China Is Finished, Exports Plunge 70%

How do the US tariffs affect us? Let me give you an example. Take the jewelry industry. The tariff they added is between 153% and 164%. For instance, we shipped some goods recently, and the customs declaration was $1,000, but the tax we need to pay is over $1,500. Think about it. The goods themselves are worth $1,000, but we need to pay over $1,500 in tax. This is because these orders were placed earlier in the year. We're gradually fulfilling them. The deadline is May 2nd, so if the customer receives the goods before May 2nd, they don't need to pay the tax. But if the customer receives them after May 2nd, they'll have to pay all that extra tax. Can you imagine? That's a huge loss, right? Mr. Feng, a business owner in Yiwu who's been in foreign trade for over 10 years, made a video on April 30th saying that the goods being shipped to the US are facing heavy taxes. His profits have turned negative. Who said Yiwu business owners are all rich? You invest in a shop, spend millions, but look at us factory workers. We're all stuck with the goods. After the tariff increase, the cost of our products has practically tripled. Because of this, more than half of the goods in our 1,000 square meter warehouse are stuck. We still have a lot of unfinished products downstairs, and the losses are huge. Yiwu International Trade City, which covers more than 6.4 million square meters, houses 70,000 businesses, over 3,000 of which engage in trade with the US. In April, the US imposed tariffs as high as 145%, and even up to 245% on Chinese goods. In response, China has imposed tariffs of 125 on US goods. The tariffs are so high that it's almost like a trade embargo. Yiwu suppliers are right at the front line of this trade war, and the impact is making many of them anxious. You have to understand, 90% of the Christmas products in the US come from China. If China stops supplying, they won't be able to get this much from other sources anytime soon. In fact, foreign trade profits have already been squeezed to the limit over the years. With these high tariffs, there's no way factories can bear this burden alone. We're worried that doing business will only get harder. Because for us, if our customers don't make a profit, none of us make a profit. If there's no profit, there's no cooperation, no win-win situation. When it comes to Yiwu, many people know it as a bustling hub for all kinds of small goods. But recently, many people have been sharing photos showing that the International Trade City is empty. With the current market conditions, if you can hold on, hold on. If you can't, just tough it out and see who can last the longest. The bosses are just holding steady. The International Trade City has closed again for the May Day holiday, and the businesses aren't open. The Trade City is closed for May Day. With the May 1st May Day holiday approaching, Yiwu Trade City is unusually quiet. Many shops haven't opened their doors. A vlogger posted a video saying, with the May Day holiday approaching, Yiwu International Trade City, with its high-priced shops, is harder to manage each year. This year is especially tough. Friends, what's your situation this year? On April 20th, a foreign trade worker in Yiwu filmed scenes in Zone 3 of the International Trade City. It showed a desolate scene. He expressed hope that the trade war would end soon. Friends, there are no more customers in Yiwu now. They've stopped coming to China. The reason is that so many Chinese factories are setting up overseas, and many countries are developing their own manufacturing industries. China's market share in manufacturing is steadily shrinking. Yiwu's market, which was once so vibrant and busy, now, I tell you, it can only be described as empty. Yiwu International Trade City covers 4 million square meters and is divided into five zones with 75,000 shops. Zones 1 and 2 sell toys, jewelry, small appliances, and hardware, while Zones 3 and 4 are dedicated to office, study, cultural, and sports goods, as well as clothing, footwear, and daily goods. The fifth zone, built in September 2005, is dedicated to imported goods and bedding. Wang Guiying, who has been running a wholesale framing business in Yiwu for 30 years, recently told The Guardian that now less than 10 percent of her customers are from the U.S., a far cry from the early days of her business. Most of her current buyers come from the Middle East. She said, business is getting harder and harder, but we can't stop. Similar to Wang, Ma Lin, who sells beauty and accessories, said that most of her clients are also from the Middle East. She believes that the impact of tariffs is hard to assess but expects it to cause major losses in trade between the U.S. and China. Yiwu merchants are more concerned about the global economic impact caused by U.S. tariffs rather than the tariffs themselves. Cheng Xiaoyan, who exports creative ashtrays, is worried that this won't just be between the U.S. and China and that other countries will follow suit. Mr. He, who runs both an online and physical store, said that this year, with rising labor costs, overall orders have dropped and sales are down by more than 60 percent compared to the last two years. He said both online and offline, business is sluggish. Yiwu, a county-level city in Zhejiang province, is home to the world's largest small commodity wholesale market. The Yiwu International Commodities Fair is one of China's three major trade expos alongside the Canton Fair and the Hua Fair. However, with tariffs escalating, shrinking foreign trade demand and rising costs, Yiwu is struggling. Now, there are no more orders going to the U.S. The already poor economic environment is affecting all industries in Yiwu. On May 1st, a Yiwu resident posted a video expressing their frustration, saying, What's going on in Yiwu this year? As a business owner in the market, I pay hundreds of thousands in rent every year, but the market is so quiet. Where have all the customers gone? Foreign trade is struggling, night markets are empty, and restaurants have signs saying for lease everywhere. Even landlords can't rent out their properties. After years of offering loans, especially this year, my clients are all saying business is extremely tough. What part of the process is causing all of this? On April 28th, a vlogger posted a video saying, The situation in Yiwu now is troubling. Business owners in the international trade city are struggling. Clothing vendors in Huangyan are struggling. Vegetable vendors are struggling. Fruit shops are struggling. Milk tea shops are struggling. Restaurants are struggling. Travel agencies are struggling. Beauty salons are struggling. Real estate agents are struggling. Construction material suppliers are struggling. Even delivery drivers for Meituan and Didi are struggling. Now even we in the loan industry are struggling. Tell me, is there any industry in Yiwu that isn't struggling right now? Another vlogger shared, The situation in Yiwu right now might be hard to believe. Many companies can't even pay salaries. What's even worse is that some companies had employees working normally one day, then suddenly in the evening, the company group chat announced that the company was shutting down and would no longer operate. One of my clients complained that their company is not officially announcing layoffs, but is just assigning more and more high intensity tasks. If you can handle it, you keep working. If not, you just leave on your own. I've met many business owners in Yiwu. Some conscientious owners, even if they have to take loans, will still pay their employees' salaries first. But some owners couldn't care less about their employees' well-being. Now it's not just companies struggling, many street shops are barely holding on. For many of these shops, their monthly income can't even cover the rent, let alone make a profit. In reality, very few people are making money right now. That's the true situation in Yiwu. On April 24, the production shop of Tuofan Apparel in Siu Chi Town, Yiwu, hundreds of workers were working as usual. Under the bright white lights, workers and sewing machines worked closely together, stitching fabric into finished garments, which were then sent to other workshops for packing. Mr. Jiang, the factory manager, said they mainly produce men's shirts and other apparel. The factory has about 350 employees and is one of the larger factories in the area. The company's owner, Mr. Jiang Zhi, told Jimu News that their business mainly focuses on foreign trade, with about 80% of their orders coming from U.S. clients. But their U.S. business has almost come to a standstill, and the impact of the trade war is significant. Yiwu business owners are now feeling lost, anxious, and are desperately seeking new ways out of the shrinking profit margins caused by U.S. tariffs. Mr. Lin, a business owner in Yiwu, said that Chinese e-commerce has already become unprofitable, which is why a few years ago he chose to enter the cross-border e-commerce and sell products overseas. He explained that merchants can either supply goods directly to e-commerce platforms or join e-commerce platforms like Timu to quickly push products into overseas markets. Mr. Lin pointed out that many people think cross-border e-commerce is easy and it's simple to make money, but in reality it's not. With such thin profits, to make money, merchants have to ship a large volume of products. However, just stocking up on goods isn't enough to make sales or profits. Merchants are forced to rely on the platform's rules, which are very strict. Either they have to lower their prices or face penalties. Sometimes, after shipping large quantities, merchants find themselves in a passive position, as the platform holds all the power. Once your goods are shipped, it's like giving the platform leverage over you. You have to follow whatever they say. Even so, many merchants still can't collect payments or have lost their products. It's truly a lose-lose situation. Mr. Lin stated that merchants are struggling to survive in such a tight spot. With the U.S. now removing the small parcel tariff exemption, even packages worth less than $800 will be taxed. This is a huge blow to Yiwu. Now, many export factories in Wenzhou, Yiwu, Foshan, and Fujian are now on holiday, and many factories are cutting salaries or laying off workers. Mr. Lin said if he could do it all over again, he wouldn't have chosen cross-border e-commerce. This business offers no sense of security. His overall sales have already dropped by 50 to 60 percent. Without volume, there's no way to make money. Mr. Lin admitted that he can't sleep anymore. Every morning when he wakes up, all he thinks about is how much he has to spend, his costs, and so on. He said, I feel like I have no way out, and I just have to keep going. I'm getting more and more tired, super tired. The company is now scaling back, including moving to a smaller warehouse, laying off employees, and cutting salaries. He chuckled bitterly, saying, even if we have employees working, they can only get a basic salary. For small and medium-sized businesses like ours, it's hard to escape the fate of being eliminated. Mr. Lin also mentioned that Yiwu's most common products are low-end items like small household goods, daily necessities, and accessories. These products are now unsellable. Things like socks, gloves, hats, toys, and storage boxes are just sitting in the warehouse, unsold and turning into garbage. He warned that anyone interested in cross-border e-commerce should think twice. The failure rate is 99 percent. Only 1 percent of people can make a name for themselves. The rest are just cannon fodder. Another Yiwu e-commerce business owner, Mr. Xu, said that the China-U.S. tariff war has greatly impacted e-commerce. The U.S. market is no longer viable, and there are no orders coming in. He mentioned that whether it's cross-border e-commerce, domestic e-commerce, or offline traditional stores, business is tough all around. Mr. Xu said, every day I feel lost, anxious, and pained. I can't sleep at night. I can't afford to hire employees, so I'm doing everything myself. I work more than 12 hours a day, with no days off, not even on holidays. I keep doing the same thing every day, selecting products and putting them up for sale. This life makes me feel so lonely and exhausted. Merchants are struggling to sell their goods, and logistics companies are also being affected. Yiwu, which once had more than 20,000 freight forwarding companies due to its huge export volume, has seen the business of these logistics companies drop by more than half. Mr. Wang, the owner of Yiwu International Logistics Company, said that since the trade war started, half of the freight forwarding companies have ceased operations, and shipping volumes have dropped by at least 70%. He sighed and said, all the small businesses that worked with us have stopped operations last week. Mr. Wang explained that because they're worried about the risk of additional tariffs being added after the goods are shipped, small freight forwarding companies now require clients to pay cash up front before shipment. Some even ask clients to pay additional taxes in real time. For example, if the shipping container has been at sea for two days and tariffs increase, the logistics company has to immediately ask the client to pay the extra tax. This is because they fear that if the goods arrive at U.S. ports and the tariffs have increased, U.S. customers may refuse to accept the goods, and the logistics company would be left with significant losses. Mr. Wang revealed that in order to survive, logistics companies and exporters have had to adopt certain strategies, but these come with risks. One of these strategies is the Fulfillment by Amazon model. Fulfillment by Amazon, FBA, is a service provided by Amazon where sellers store their products in Amazon's warehouses, and Amazon handles storage, picking, packaging, and shipping. This model may be too costly for small sellers or those heavily impacted by high tariffs. Buyers are very sensitive to price. A price increase of just one dollar can lead to a noticeable drop in sales. However, it's not just about keeping prices low. Sellers must adjust prices based on market trends. If competitors raise their prices, low-priced stock will sell out quickly, leaving nothing to sell afterward. Another way to avoid high tariffs is through cargo consolidation. For example, the tariff on clothing is extremely high, around 145%. If a container is filled entirely with clothes, the cost becomes unbearable. Therefore, logistics companies usually load only a small amount of clothing, around 16 cubic meters, and then mix with goods that have lower or no tariffs. This cargo consolidation strategy aims to reduce the average tariff rate and the total value of the goods, thereby lowering the amount of duty to be paid and creating some breathing room for businesses. However, Mr. Wang emphasized that this method carries significant risks. If Customs discovers inaccurate declarations, the company could face hefty fines. For example, a single container could incur a fine of over $100,000. Mr. Wang believes that if the trade war continues, in three months, only about 5,000 of Yiwu's 20,000 logistics companies will remain. In other words, more than three-quarters of companies will be eliminated. This is the true situation in Yiwu today, a city that was once bustling with business, now trapped in a crisis. Yet the people of the city can only watch helplessly.