China's US Exports Trapped 3 Months to Skip 55% Tariffs: 100% Tariff Hammer Incoming?

On July 21st, a TikTok user working in China's export industry posted a video revealing that due to the ongoing U.S.-China tariff war, their clients' goods bound for the U.S. have been stuck in a warehouse since April. They still can't be shipped out and are just sitting there, waiting. I don't know how many factories are currently facing inventory backlogs due to the tariff war, especially with U.S.-bound goods. These are some of the stocks my clients have piled up because of the tariff war. I remember when I first came here about 2 or 3 months ago and the goods have just been sitting here ever since, not moving at all. Look, they have lots of goods piled up here. Because of the tariffs, it's all about waiting and waiting. The distributors aren't making any profit, and the people shipping out the goods can't afford to pay the tariffs. So the result is that these goods can't be shipped out and just keep waiting. But looking at the situation now, there's little chance it will get better. The loss of profits is already inevitable. I don't know how many companies are facing this, or how much inventory everyone else has piled up. While the current situation of the factories holding these goods remains unclear, one thing is certain. Since the second round of the U.S.-China trade war began, many export-oriented factories have been forced to shut down or suspend operations. Inventory backlogs, shrinking profits, and a lack of orders have become widespread. Foreign-owned businesses are also accelerating their exit from China. On July 7, another blogger in the foreign trade industry also lamented. This year is tough. I just visited an old client who makes shoes, and he told me that three of his suppliers went bankrupt this month. What happened? He told me that ever since Trump imposed the tariffs this year, their orders haven't been as many as before. Plus, Europe's economy isn't doing well, so their orders aren't full. Many of their orders have been taken back in-house, leaving the small factories they used to rely on with no orders. These small processing factories used to be supported by the big factories. Now that the landlords have no more resources, what can they do? In the end, they went bankrupt. But what's shocking is that all three went bankrupt at the same time this month. At least 1,000 denim factories in Zhongshan have closed this year. Now, entire physical enterprises have entered a stage where they can't continue operating. Some businesses that seem successful are just fake prosperity with no profit. It's crazy. Now, if some factories can't hold on anymore, they should just shut down, because next year will be even harder. The small factories that are still struggling due to a lack of orders are left with workers who can only sit around doing nothing. Let me show you the current situation at our factory. Those who are sitting are playing on their phones, and those who are standing are also playing on their phones. I just started my fifth night shift here, and then we're told there's no need for night shifts anymore because there's nothing to do. Now everyone's discussing their holiday plans. They're wondering where to go for a long break. Factories are now closing for several days because there's nothing to do. Last month, orders were okay, but this month there are no orders, so they've been off for a week. Factory owners are desperate for new orders. But for many, the only option left has been to close shop entirely. No orders anymore. Jiangsu, Zhejiang and Shanghai have no orders either. A factory that invested 80 million is also choosing to shut down. Both big and small factories are shutting down. Just these past few days, a big factory in Dongguan called Celestica Guangdong Technology Limited, which used to have thousands of employees, suddenly announced it was closing overnight. Another company in Foshan making doors and windows also shut down overnight. Honestly, it's really hard to run a factory nowadays, no matter how big or small it is. One of the companies mentioned is Celestica Dongguan Technology Limited, located in It was established in October 2004 with a registered capital of 32.5 million US dollars. It was a wholly-owned subsidiary of Canada's Celestica Inc. At its peak, the factory employed over 10,000 workers and specialized in high-end electronics like servers and computers. The facility covered 100,000 square meters and served as Celestica's core manufacturing base in southern China. But due to the US-China trade war and a broader shift in the global supply chains, Celestica began relocating production to Mexico and Eastern Europe at the request of its North American clients. In 2023, nine new overseas factories went into operation, leading to a steady decline in orders for its China-based plants. Celestica is a key supplier of AI data center equipment to companies like Meta, Microsoft, and Google. It also manufactures high-reliability avionics, radar systems, and communications equipment for defense contractors. In 2024, the share of Celestica's revenue from North America grew from 29% to 47%. With continued growth in its aerospace and defense business, the share of high-margin North American orders is expected to rise even further in 2025. But rising US tariffs have driven up operating costs at the Dongguan plant, squeezing profit margins. On June 25, Celestica announced that Celestica Dongguan Technology will be restructuring. On June 30, the industry was shaken by the sudden collapse of another major manufacturer, Foshan Aotai Packaging Products Company, a leading name in the packaging and printing industry. Founded in September 2021 with a registered capital of 30 million yuan, the company was led by Wu Jinhe. In 2022, Wu made bold claims that he would build the largest packaging plant in Asia, aiming for an annual output value of 10 billion yuan. But Aotai launched during the pandemic and was later hit by the fallout from the US-China trade war. As the Chinese manufacturing sector struggles under economic headwinds and global supply chain shifts, Aotai couldn't survive. The company folded within just three years, leaving Wu heavily indebted and financially ruined. On July 3, an owner of a printing company from Zhongshan City, Guangdong, visited the now-abandoned Aotai factory and filmed its empty halls, a stark contrast to the company's once-grand ambitions. Today, I visited Aotai, which was once a pride of the printing and packaging industry. I looked around and realized, oh no, our printing industry is tough. There are too many failed cases with our industry. Right now, I feel a mix of emotions. Look at this. It's so crazy. These are papers that weren't printed in time. They're waiting to be delivered. Colleagues in the printing industry, be careful. The factory is empty now. Even the air conditioners have been taken out. That business owner also admitted they're facing overwhelming pressure in today's environment. Today is July 3, just a few days into this month. One by one, businesses are closing, and bankruptcies are spreading. Honestly, I feel so upset. Sometimes I even feel like I can't catch my breath. You know, a well-established foreign trade lighting company in Foshan has closed down. Another printing packaging company in Foshan is also in liquidation. And there's a leading semiconductor packaging company in Shenzhen, which has announced it's taking a two-month break, with no confirmed resumption date. These companies were all leaders in our circle. It's hard to accept, and it's heartbreaking and helpless. After surviving three years of the pandemic, we thought the dark times were behind us, and that things would get better. But now look at this. Many people are going to lose their jobs soon. Manufacturing is tough now. Factories have nothing to do, and owners can't sleep at night. And what about workers? They're struggling too. Without work, they have no income. So factories are facing two choices, either lay off workers or shut down entirely. So many people are about to lose their jobs. Since April, the second round of the U.S.-China trade war has seen both countries imposing steep reciprocal tariffs. After two rounds of negotiations, the two sides agreed to a temporary 90-day truce. During this period, most Chinese goods exported to the U.S. are subject to a 55% tariff rate. According to White House officials, the 55% rate includes several layers. A baseline 10% reciprocal tariff applied to nearly all U.S. trade partners, a 20% tariff targeting imports from China, Mexico, and Canada as part of anti-fentanyl measures, and an earlier 25% tariff imposed during Trump's first term specifically targeting China. The current truce will expire on August 12. On Tuesday, July 22, U.S. Secretary of the Treasury Scott Besant said in a Fox News interview that he will meet with Chinese officials in Stockholm on July 28 and 29 for a third round of high-level talks. He explained that the discussions will focus on rebalancing the trade relationship between the two countries. Besant revealed that both sides will explore extending the current truce and address China's heavy reliance on manufacturing and exports. He emphasized that the U.S. wants to see China reduce its excessive industrial capacity and shift towards a more consumer-driven economy. If no agreement is reached, the negotiations are not extended, the previous punitive tariffs could be reinstated. The U.S. had previously threatened to raise tariffs on Chinese goods to 145%, while China has prepared to increase its tariffs on U.S. goods to 125%. Besant commented, I believe we can extend this agreement, perhaps in 90-day intervals. His remarks suggest that the current 55% tariff on Chinese goods may remain in place for the time being. Besant also stated that Washington hopes to discuss broader issues, such as China's purchases of oil from Iran and Russia, and strategies for reducing China's export volume. Previously, on July 14, Trump warned that if Russia and Ukraine fail to reach a ceasefire agreement within the next 50 days, the U.S. would impose a 100% secondary tariff on countries purchasing Russian energy products. NATO General Secretary Mark Rutte stated on July 15 that countries like China, Brazil and India, if continuing trade with Russia, could face severe secondary sanctions. In a CNBC interview on July 21, Besant also warned about the consequences of China buying Russian oil. He said any country buying Russian oil that is under sanctions will face secondary tariffs of up to 100%. If the upcoming negotiations in Stockholm fail to reach an agreement, China, as a major buyer of Russian oil, could face a 100% secondary tariff. This would undoubtedly seal a devastating blow to China's foreign trade factories. Unfortunately, the channels China previously used for transshipment, namely Vietnam and Southeast Asia, have largely been shut down by the U.S. through tariffs and other policies. Vietnam is one of China's most important transshipment hubs. On July 2, the U.S. reached a preliminary trade agreement with Vietnam, imposing a 20% tariff on goods exported to the U.S., but applying a 40% tariff on goods transshipped through Vietnam. This regulation is primarily targeting Chinese goods, aiming to curb transshipment trade used to circumvent U.S. tariffs on China. Vietnam's largest trade partner is China, with imports from China reaching about 134.9 billion U.S. dollars in 2024, primarily raw materials and intermediate goods. At the same time, the U.S. is the largest export destination for Vietnam, receiving 30% of its exports. Particularly since President Trump's first term, when tariffs were imposed on hundreds of billions of dollars of Chinese goods, trade between the U.S. and Vietnam has increased. In 2024, Vietnam's exports to the U.S. will reach 136.6 billion U.S. dollars, with a trade deficit of 123 billion U.S. dollars, making Vietnam America's third-largest trade deficit partner. These figures show that there is a near-perfect correlation between Vietnam's imports from China and its exports to the U.S. This asymmetric trade relationship serves as a key basis for the U.S.'s decision to impose a 40% tariff on transshipment trade. The U.S. government has repeatedly accused Chinese companies of using Vietnam to bypass tariffs, including simple processing of goods in Vietnam before labeling them as made in Vietnam for the U.S. market. Some goods are even just briefly stopping in Vietnamese ports before leaving for the U.S. On June 4, U.S. Secretary of Commerce Howard Lutnick testified in the Senate, saying Vietnam buys $90 billion worth from China, marks them up, and then resells them to us. He further stated, Vietnam is just a conduit for Chinese goods to reach us. The U.S. has been urging Vietnam to take stronger action against trade fraud and implement more measures to prevent Chinese goods from being rerouted through Vietnam and resold to the U.S. Under the newly reached agreement, the U.S. has required Vietnam to prove that its exported goods are made in Vietnam, not merely relabeled Chinese goods. The U.S. may also implement stricter checks on Vietnamese products that contain Chinese components. In response, Vietnam has set up special teams to intensify efforts against trade fraud and counterfeit made-in-Vietnam goods, sharing information with U.S. customs. This makes it increasingly difficult for Chinese products to use Vietnam as a transshipment hub. A Shenzhen business owner revealed that as the U.S. intensifies its tracking of Chinese products, it has become harder for these goods to pass through third countries. He said, customs in Vietnam, South Korea, and Malaysia are all actively intercepting Chinese products. By June, this route was already becoming unfeasible. Meanwhile, the U.S. Department of Justice has increased enforcement efforts, focusing on false declarations of origin and fraudulent country-of-origin claims for small machinery, electronic products, and toys. These are now a priority for law enforcement. Recently, many people on Douyin have been discussing how difficult it has become to do transshipment trade via Vietnam. Vietnam is getting harder by the day. I just came back from a business trip to Vietnam. The situation there, especially after the new tariff policies took effect, is not looking good. Vietnam, because of its dependence on the U.S. market and geopolitical reliance, is bending to the U.S. This isn't our problem, but what bothers us the most is that 40% transshipment tariff. It's well known that many Chinese enterprises make parts or components in China, send them to Vietnam for simple assembly or packaging, and then export them to the U.S. to evade tariffs. But now, it seems like the U.S. is closing this route down. According to one Douyin user, Chinese companies in Vietnam are feeling the strain. They may still be able to weather policy changes or seek new avenues, but newer ones, those that have been operating for a year or two and are still in the early stages of setting up, are hit the hardest. Their plants have fallen apart, and they're left helpless. The user also asked local factories and friends if it would be possible to move entire supply chains to Vietnam. They felt it was unlikely. Unless a supplier could build a complete industrial chain in Vietnam, the cost of building a factory for just one company would be prohibitively high, with no price advantage. Shifting entire supply chains is essentially unrealistic. Due to issues with work efficiency and raw materials, the supply chain in Vietnam is already 10-15% more expensive than in China. In the past, tariff differences allowed for some profit, but now that advantage is gone. Traders are also trapped, as all finished products or components transshipped from China are now subject to the 40% high tariff. Factories and customers are struggling to cope. The blogger suggested that Vietnam is just a short-term target for the U.S., and Southeast Asia and even Europe may face similar policies in the future. The U.S.'s goal is clearly to shut down China's transshipment trade altogether. He described the situation for China's foreign trade as dire, comparing them to floating without root, drifting aimlessly without knowing where they'll end up. According to the user, with the current international situation, foreign trade factories and companies are facing an uncertain future, and they must be prepared for a battle of wits with the U.S. Another user mentioned that many Chinese companies engaged in transshipment with Vietnam have closed their doors and run away. In places like Hanoi and Ho Chi Minh City in Vietnam, many companies are shutting down, and everyone's running away. On the surface, it looks like the new e-invoice regulations are causing panic. But if you dig deeper, you'll realize the real problem is that many small and medium-sized Vietnamese businesses rely too much on special goods imported from China. Now, with stricter inspections, they can't sell these goods anymore, so their businesses has become difficult. This situation tells us that if we want to do business in Vietnam and grow, we need to play by the rules. Ensure reliable sources, transparent customs clearance, and proper logistics. The U.S.-Vietnam trade agreement serves as a reference and a warning to other Asian countries, such as India, Thailand, and Indonesia, which are currently negotiating with the U.S. Against the backdrop of the 55% tariffs on Chinese goods, the transshipment tariffs in the U.S.-Vietnam trade agreement undoubtedly make China's economic situation worse. Current affairs commentator Wang He pointed out that with China's domestic demand weakening and investment growth reaching its limits, exports remain crucial for economic growth. However, Trump plans to sign trade agreements with dozens of economies in July and August, forming a global tariff alliance centered around the U.S. If this alliance takes shape, not only will China's exports to the U.S. be severely impacted, but other countries may also increase tariffs on Chinese goods. Particularly, after China's exports to the U.S. are blocked, China might shift to dumping goods in Southeast Asia, the EU, Africa, and Latin America, putting pressure on these regions and potentially leading them to follow the U.S. in imposing counter-tariffs on Chinese products. Wang He stated that if there's no significant improvement in investment and domestic demand, relying on export-driven economic growth will no longer be feasible. China's economy will face severe challenges and a heavy blow.