Chinese home furnishing manufacturers are experiencing a tsunami of relief. Recent announcements have suggested that the United States will simply suspend the tariffs it has placed on them. Business owners such as Derek Wang and He Ke have suffered losses ever since the trade war started. In the face of these challenges, they’ve found creative ways to reinvent their business and look to diverse markets.
Derek Wang owns a small furniture manufacturing company that makes sofas. When tariffs increased under the Trump administration, he stopped production and told his employees to go home. Wang felt the impact of the tariffs on his business immediately after they increased to 50%. It turned chaotic when the tariffs increased up to 145%. He remembered, “By the time the tariffs reached 50%, we were already at a stop. When they hit 145%, we definitely could not operate. It was just not possible.” This stop on production especially affected Wang’s firm. It led to unforeseen, rippling impacts on the rest of the industry.
Wang’s business, once accustomed to prospering off of orders from the US market, has completely pivoted. Since COVID hit, he figures he’s only needed one floor of his facility. On top of all that, he’s led on just 40 employees this whole time. The move towards a leaner operation illustrates an important change taking place in the world’s manufacturing powerhouse. Today, much of corporate America is just as eager to diversify and break the long-held addiction to American consumers.
Owner of Gongyuan Furniture, He Ke experienced much of the same struggle when his business was upended by the unpredictable nature of tariffs. Similar to Wang, He was forced to stop production when tariffs jumped to 50%. The announcement of a potential deal to reduce tensions thrilled He. He was able to almost instantly recall his employees from the New Orleans area, jump-starting his business. He said, “I’m just a little businessman. I do hope to convey that the competition between these two countries is short-lived. As species that hope to survive together for a long time, they should sit around that table. Communicating clearly and openly is key to helping them sort through their differences.
Even in the midst of this turmoil, Wang has good cause to be optimistic about what lies ahead. He’s convinced the trade war has sped up what was already a strong drive to reach far outside American markets. More recently, he designed an American-made air fryer that has received rave reviews from American consumers. This advanced electrical appliance includes smartphone controls for effortless use. It can bake, roast and grill, making it an ideal fit for today’s consumers who desire flexibility in their cooking space.
With an unwavering commitment to quality and innovation, Wang’s artistry shines through. He even threw in the quip that Elon Musk was a happy customer, with Musk reportedly kicking back on one of his sofas. He said that American customers are willing to pay for the tariffs. They continue to advocate for reductions on their side during the negotiations process. For now, our US customer is ready to absorb the cost of the tariffs. In fact, Wang recalled that they needed to play hardball with them. As compensation, they asked for a waiver of certain expenses.
No matter the outcome, the trade war has definitely taken a toll on the region. Some manufacturing plants in neighboring Dongguan have shuttered their doors outright as a result of the tariffs. In return, Chinese officials are calling on businesses to take advantage of nascent opportunities. Over the next few years, they’re prioritizing emerging markets in Africa, South America, and Southeast Asia. This strategic pivot is indicative of a broader trend taking root among Chinese manufacturers. They’re running hard to not be dependent on the U.S. market.
He felt the financial burden of establishing his business importation amid the increasing tariffs. The first hit of suddenly having to pay $500,000 in tariffs was tough for his business to absorb. He knows that creativity and flexibility are going to be imperative even to exist in this unpredictable economy.
That’s essentially what Beijing has done by slicing its own levy on American goods from 125% to 10%. This step marks a promising thaw in bilateral trade relations between the two countries. Many Chinese businesses remain wary and continue to explore diversification strategies to mitigate risks associated with future trade disputes.
As both Wang and He continue to expand within this tumultuous domain, they remain optimistic for a more secure tomorrow. Wang reflected on the resilience required during these challenging times: “I tried to keep smiling through my anxiety for the sake of my 40 workers.”