Chinese suppliers are ignoring the tariff threats from the U.S., while buyers are snatching up their cheap goods.

China can withstand any new tariffs that the world throws at it - even punitive ones that Donald Trump plans to impose if he wins a second presidential term, because its prices are too competitive to give up. This sentiment prevails at this month's Canton Fair. Many buyers and sellers at China's largest trade event, held in the southern city of Guangzhou, have disregarded the risks of an escalating trade war.

“My clients told me that even a 50% rate wouldn’t make them leave,” said Jack Jin, who sells tools for freight and truck parts from Southeast China. He mentions that about half of his orders come from Americans who can sell his products for four times what they pay him. Tensions between China and its trading partners are rising in the election year in the U.S., with accusations of dumping and unfair subsidies for goods from the world’s leading manufacturer. The list of targeted products is getting longer, including metals and vessels, as well as electric vehicles.

Trump says he may impose a comprehensive tariff on China of over 60%. President Joe Biden, his opponent in the November elections, promised last week to triple tariffs on Chinese steel, an area where emerging economies have also expressed concerns. The European Union has launched an investigation into subsidies for electric vehicles from China, which could lead to new tariffs being imposed within a few months, and there is also a review underway in the solar and railway industries. However, traders at the Canton Fair say the world will still need Chinese goods.

“Divide the cat”

Samuel Jackson, who was at the fair as a buyer for a Bosnian furniture company, said he could get products of "very, very similar" quality for half the price offered by European manufacturers. Tariffs may have some impact, he said, "but China is too big a country.

• His retailers at home refused to pay higher prices when Trump imposed tariffs, and instead asked him to secure a slightly cheaper version from manufacturers.
• “At the end of the day, who paid? The consumer,” he said. “You either compromised on the quality of the product or paid more for the same product.”

The student described one of the ways he found to offset tariffs by switching to what's called a Free On Board price. This meant that the logistics and warehousing costs were passed on to his American clients - and the selling price used to calculate the tariffs decreased. "There are many different ways to skin a cat," he said.

Plans as needed

Of course, importers who have made the journey to Guangzhou probably consider themselves optimistic about China, and some manufacturers there have expressed fears of a trade war. A Shanghai-based vendor, a manufacturer of plastic slings,who asked not to be identified,says she worries about the prospect of another Trump presidency. She says her company has managed to survive the past few years under pressure to keep developing more products even as profits have fallen, and described the business environment as a tailspin.

• If the falling production costs in China impress foreign buyers, it is also a sign of weak domestic demand, where households are reluctant to spend after a prolonged downturn in the real estate sector, which has left the country at risk of deflation.
• Switching to exports may help achieve the growth target of around 5% set for this year, but it also undermines the longer-term plan for domestic consumers to play a larger role in stimulating the economy.

Jin, a truck parts seller, admitted that he is "a little" worried about Trump, whom he sees as more unpredictable than Biden. He is also aware of the growing competition from other developing countries. His company stopped producing the metal ring used on trucks because Indian manufacturers, unburdened by tariffs, were able to offer lower prices.