By Sophie Yu, David Kirton and Ellen Zhang
BEIJING/SHENZHEN (Reuters) -When she heard the news that Washington had slashed punitive tariffs on China for at least 90 days, Deng Jinling, manager of a Chinese company that exports thermos flasks to the U.S., popped open a bottle of champagne with her husband.
While Deng celebrated the reprieve with bubbles, she worries about what might happen after 90 days, and has sent her 20-year-old daughter to the U.S. to help scout for a warehouse there to mitigate risks and guard against any further fallout from tariffs.
“My biggest worry is Trump will forget tomorrow what he said today,” said Deng, manager of Lucky Bird Trade, based in the export manufacturing hub of Yiwu, the world’s largest wholesale hub for small manufactured items, referring to U.S. President Donald Trump.
Chinese factories are heavily dependent on the U.S. market, but manufacturers in China have buckled up, uncertain on how to navigate an increasingly unpredictable trade war that has threatened to upend global supply chains – and the uncertainty prevails despite the temporary truce.
After talks with Chinese officials, the U.S. said on Monday the two sides had agreed to a 90-day pause under which Washington will cut tariffs on Chinese imports to 30% from 145% and Chinese duties on U.S. imports will drop to 10% from 125%.
While the news lifted global markets, the cheer has been tempered by caution among some manufacturers in China, given the uncertainty over what could happen after 90 days, with some still intent on scouring for opportunities overseas to hedge their bets.
Christian Gassner, General Manager of Limoss, a German manufacturer of control panels and remote devices based in the Chinese manufacturing hub of Dongguan, is in Malaysia seeking to expand operations for the U.S. market with a partner there, and says he will continue to do so despite the tariff pause.
“Even with the 90-day pause, it feels more like someone just hit the snooze button on a fire alarm. Tariffs, politics, and policy mood swings don’t exactly scream ‘stable business environment’,” he said.
“Sticking to one region these days is like building your house on a trampoline. For Limoss, the U.S. is a top-three market, so crossing our fingers isn’t a strategy – we need real options, real fast, before the next plot twist drops.”
Candice Li, marketing manager of a medical devices maker based in China’s southern province of Guangdong, said her first reaction was suspicion and she wondered if the 30% tariff would soon translate to 60%.
“As the president of a country, he talks as easily as telling a joke, threatening his credibility,” Li said, referring to Trump.
Her company had paused deals with U.S. buyers for more than a month, but Li said she now expected clients to resume trade and pay the tariffs.
With around 60% of orders coming from the U.S., her company had scaled back work hours and shifts after the tariffs were hiked to 145%.
“People from supporting departments only worked for half of the month, which is equal to a pay cut,” Li said.
YEAR-END HOLIDAYS IN FOCUS
The timing of the truce is key for some Chinese manufacturers. The month of May is when U.S. retailers traditionally make orders for year-end holidays such as Halloween, Thanksgiving and Christmas.
Jessica Guo, who manages a Christmas tree factory in Jinhua in eastern China, said she was scrambling to get orders out.
“American clients are particularly anxious for us to ship the Christmas trees, but we can’t produce them fast enough. We can only schedule orders until the end of August, but by then, the situation between the U.S. and China is uncertain.”
Analysts said customers will take the 90-day window of opportunity to ship as many goods as possible into the United States, although the outlook beyond that is uncertain.
On Monday, the container shipping industry welcomed the agreement between Washington and Beijing, saying it expected the deal to boost bookings.
Some smaller exporters with businesses in emerging markets see opportunities in the U.S.-China agreement.
Eileen Xiong, sales director at Dongguan Vdette Information Tech Co, an air purifier manufacturer, said many Chinese exporters focusing on the U.S. market had suspended deals over the past month amid the trade war and that had intensified competition in emerging markets where she operates, such as India, forcing her to lower prices.
“We are a small company … For big brands, they will not give up the U.S. market. They started to put some energy into emerging markets or markets with lower prices. Now, with a better environment, they may focus their attention back to the U.S., leaving less pressure on us,” said Xiong.
(Reporting By Sophie Yu, Ellen Zhang and Liangping Gao in Beijing; David Kirton in Shenzhen; Writing by Anne Marie Roantree; Editing by Muralikumar Anantharaman)
