U.S.-China trade tensions worry Christmas exporters

4 hours ago

Yiwu city, sometimes referred to as Santa's real workshop, is just a short bullet train ride from Shanghai.

Some 600 factories in the city are estimated to produce two-thirds of the world's Christmas products, according to the local Christmas Products Association.

The items are on display at the Yiwu international wholesale market, which is a sprawling complex that is almost two square miles in size – picture 280 Macy’s department stores.

A whole floor is dedicated to hair clips, while another to flowers. On the second level, rows of Christmas trees and Santa suits.

According to the most recent figures from the U.S. Census Bureau, some 90 percent of imported Christmas ornaments and lights in the U.S. comes from China.

Summer is traditionally the time of year when vendors place their orders for the many Christmas decorations and small gifts that end up in American households.

The U.S. hasn't imposed tariffs on these products so far, but heightened trade tensions with China are worrying many Chinese exporters.

"For now, the U.S.-China trade friction has no real impact on us but who knows if that will change in the long term,” Wang Xiangming with Haojun Toys said.

The company exports drones and remote-controlled cars to the Middle East, Europe and the U.S. and Wang said overall sales have been suffering for the past two years as a result of fierce competition from  e-commerce platforms.

Jiang Yuelan, who makes Christmas tree decorations for Europe and the U.S., is faring better.

“Our orders this year have been steady because we have regular clients,” Jiang said.

Her bestsellers to the American market this year include tree ornaments shaped like snowflakes and reindeer that are dipped in white glitter.

While Christmas decorations have not been subjected to U.S. tariffs, Jiang knows they could be. That is concerning for Jiang at a time when costs are going up.

 

The paper boxes she uses to ship her products and the recycled plastic pellets she needs to make her decorations have been more expensive since China stopped accepting shipments of waste paper and plastic from foreign countries earlier this year.

“Paper boxes last year cost 7 yuan ($1) each but now the price has almost doubled and for a while, the price of plastic pellets fluctuated by the day,” Jiang said.

Other manufacturers said their costs have risen in order to comply with China’s higher environmental standards. In some cases they have had to move their production base out of residential areas into more expensive industrial zones. At the same time, wages have gone up.

Suppliers complain that their profit margins are getting smaller.

If the U.S. does impose a tariff of 10 or 25 percent on Christmas decorations, suppliers argue that they must pass the extra cost onto customers.

U.S. trade officials highlight the fact that they have avoided taking punitive actions against finished consumer goods many Americans buy from China.

So far, the U.S. has imposed tariffs on an estimated $3 billion worth of Chinese steel, aluminum and solar panels. There is also an extra 25 percent tariff on a range of electronic and machine parts from China worth $34 billion. 

However, the U.S. is preparing a second tranche of tariffs on $16 billion worth of Chinese imports and it is unclear what the final list of products will be.

Additionally, President Donald Trump has instructed U.S. trade representative Robert Lighthizer to prepare another list of tariffs on $200 billion worth of Chinese goods. Last week, Trump asked Lighthizer to consider increasing the proposed tariffs from 10 to 25 percent.

“The Trump administration continues to urge China to stop its unfair practices, open its market, and engage in true market competition,” Lighthizer said in a statement.

“Regrettably, instead of changing its harmful behavior, China has illegally retaliated against U.S. workers, farmers, ranchers and businesses.”

Some products that are not subjected to tariffs have been affected by the current U.S.-China trade dispute.

Qiwang Textile exports more than a hundred thousand flags to the U.S. every month, including ones printed with the words “Trump 2020 – Keep America Great!”

The firm’s owner, Wu Yuepei, says U.S. customs recently held up one of her shipments for days.

“I’m not sure why. I was told that the inspection on goods from China may have become stricter,” Wu said.

It is a sensitive time for Chinese manufacturers.

Another flag maker, who will only give her surname, Liu, for fear of government retaliation, said she doesn’t put “Made in China” labels inside her U.S. bound products anymore.

She said that didn’t go far enough for one customer, who requested American flags with “Made in the U.S.A.” labels.

Liu said she declined the order.