By Simone McCarthy and Hassan Tayir, CNN
Hong Kong (CNN) — A surprise breakthrough in US-China trade tensions has unleashed a flurry of activity across Chinese factories and ports as American and Chinese companies rush to make the most of a 90-day rollback of heavy tariffs announced earlier this week.
For Niki Ye, a salesperson in southern China who sources toys for sale on Amazon, a 30% spike in orders since that announcement has meant her company is staffing up to meet demand. “And this is only the first week,” she said.
Liu Changhai, a sales manager at an export-oriented agency in eastern China that specializes in home furnishings, said sales now match those during a typical peak season – but there would be a delay in sending goods.
“The new orders have not been manufactured yet and are not ready for shipment,” he told CNN.
Meanwhile, ports are about to start humming as companies rush to ship out inventory that had been held back during weeks of rising trade tension. Bookings for shipping containers from China to the United States have spiked almost 300% in the seven days ending May 13, compared with those in the week ending May 5, according to container-tracking software provider Vizion.
That’s all a radical shift from last month, when a rapid, tit-for-tat escalation of US-China tariffs initiated by US President Donald Trump drove duties so high that trade between the two once deeply intertwined economies largely ground to an abrupt halt.
On Monday, American and Chinese trade negotiators meeting in Geneva announced both sides would reduce tariffs by 115 percentage points for an initial 90 days.
The deal, which went into effect Wednesday, brings US tariffs on Chinese imports into the country to 30%, not including pre-existing measures imposed during Trump’s first term. China’s duties on all US imports raised last month, meanwhile, fell from 125% on most US imports to 10% – though earlier tariffs on select goods also remain in place, officials said. Negotiations are expected to continue in the weeks ahead.
“Regardless of the outcome of future negotiations, companies must seize this 90-day window,” Ge Jizhong, chairman of major customs declaration firm Shanghai Xinhai Customs Brokerage told state-backed financial outlet Securities Times earlier this week.
“American companies will rush to replenish their stocks within 90 days, and Chinese companies will also rush to ship goods and clear out their warehouse inventories.”
‘Move them back to China’
Among those helping companies navigate that rush is Ben Schwall, whose China-based supply chain management firm STG Consultants helps companies source products and also advises them on their China and Asia strategies. He says he’s spent this week fielding queries from clients.
Some of them heard the news while in the middle of re-routing supply chains and manufacturing away from China to other Asian countries to avoid the tariffs, he said.
“We have orders that have been placed in Vietnam and in Indonesia and we’re now asking ‘Can you move (the orders) back to China?’” Schwall said. Then there’s a scramble to get orders that were canceled in China going again or finished goods that had been held in storage shipped out, he added, even though tariffs remain higher than they were before Trump’s second term.
“It’s a ‘please continue the orders that were canceled’ situation,” he said of communications with Chinese manufacturers, some of whom Schwall said had already furloughed workers, while at least two factories they work with had shut down in the wake of the tariffs.
On the other side of that equation are Chinese manufacturers like Vivi Tong in eastern Zhejiang province, who is gearing up to ship out goods from her warehouse and for a surge in orders. Her factory makes remote-controlled toy cars that are sold by big box retailers in the US.
“As a factory, we hope to receive as many orders as possible in these three months and complete production and shipment as soon as possible,” said Tong, adding that she “cannot estimate” what will happen after that period.
Chinese state media this week also covered the phenomenon, with multiple outlets reporting on suppliers working overtime and even into the night to meet a surge in demand from US companies clamoring to restart orders and get them shipped out within the 90-day window.
Greg Mazza, who owns a lighting company based in Danbury, Connecticut, said he was among those “acting rapidly” to get inventory that had been produced in China, but not shipped out, onto shipping containers, as he was concerned about an uptick in shipping costs as many companies did the same.
“We did release a lot of containers now, or they’re being released, and we are placing orders,” said Mazza, who noted that he was in a better position than some companies having prepared for tariffs ahead of time by building up his inventory in the US last year.
Shipping firms are already noticing the uptick.
Danish shipper Maersk, which had seen a 30% to 40% drop in China-US ocean volume in late April, is now adding capacity to its trans-Pacific services after an increase in bookings following the agreement, a spokesperson told CNN.
Ben Tracy of Vizion, the shipping container tracking firm that observed a 277% surge in bookings for the seven days ending Tuesday, said the “container export rush” could interfere with what would typically be a peak shipping season in summer.
“The question is – how long is that (rush) going to last? How much of a backlog has been waiting for bookings and departures – and is that going to go on for three weeks, for six weeks?” he said. “Either way … I don’t see how there’s enough time for these containers to make their way back to China for the next voyage around the peak season.”
Uncertainty looms
The mad scramble to restart, ramp up or ship out orders from China is all the more complex for businesses due to pervasive uncertainty not only around where US-China tariffs will ultimately land, but also US duties on other countries in the region.
Trump last month announced, and then largely paused, a host of so-called reciprocal tariffs on countries around the world. Those included high levies on goods from Southeast Asian countries like Vietnam and Cambodia, which had become a destination for companies shifting production away from China during Trump’s first trade war.
Now companies that rely on exports from the region are looking at two ticking clocks, one counting down the 90-day pause on tariffs from countries like Vietnam and the other on those from China, as they decide whether to uproot years-long business relationships in China.
Mazza, who runs the lighting business in Connecticut, said he had been exploring moving some manufacturing from China to Vietnam, where the set-up process is likely to take about a year and production would eventually cost him about 10% to 15% more per unit than manufacturing in China.
But he said he wasn’t ready to give up on China entirely.
“Quite frankly, I’m going to do everything I can to not get out of China, because my China factories have been there for me, I’ve been there for them. You have a relationship – I value partnerships, and relationships and, look, they make my product really good,” he said. “So I’m going to fight till the end – it’s just the truth.”
And for many factories in China looking at the same uncertainty, the question of how to survive, come what may, is the top priority.
Tong, whose factory makes the remote-controlled cars, says she’s not sitting by idly to find out whether the tariffs will continue, increase or fall following the 90-day pause.
“We are also working hard to expand other new markets … especially Europe, (where our orders) have increased by almost 20%,” she said, adding that to keep revenue coming in, “we need to expand.”
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