Editor's Note: Since April, the "roller-coaster" style operation of U.S. government tariff policies has triggered global shocks, and China's transit trade is facing unprecedented changes. In the face of increasing uncertainties, Chinese foreign trade enterprises urgently need to consider three questions: When traditional transit trade channels are blocked, how can they build an "upgraded" supply chain system? How can Chinese companies reduce their reliance on the U.S. market and open non-U.S. markets? When the United States combines its tariff war with technology blockade, how can export-oriented enterprises find a balance between compliant operations and technological breakthroughs?
Against this backdrop, Guancha Observer Network connected with Dani, author of the commercial book series "Overseas Journey," and former head of Huawei's Middle East, North Africa, Latin America, and Southeast Asia major customer group business, for an in-depth analysis of the way out for Chinese companies under tariff pressure, providing actionable strategic paths for enterprises.
[Interview by Guancha Observer Network, Zheng Leihuan;整理/Liao Yiheng]
Accelerate diversification layout to reduce operational risks
Guancha Observer Network: The impact of U.S. tariffs on China mainly focuses on several key areas where China exports significantly to the U.S., such as electromechanical products (accounting for 9% of China's exports to the U.S.), textiles, apparel, new energy (such as electric vehicles, lithium batteries), etc. What do you think about the current impact of these sectors due to tariffs? What is the attitude of the industry towards U.S. tariff policies?
Dani: I believe that we first need to classify these enterprises simply.
The first category is electromechanical enterprises. In the electromechanical and high-tech fields, most of China's self-branded enterprises left the U.S. market or did not enter it a few years ago. Taking new energy vehicles as an example, except for BYD which became an exception due to its electric bus business (buses are not considered passenger cars), almost no other self-branded passenger car enterprises have entered the U.S. The situation is similar for communication enterprises in the ICT (Information and Communication Technology) sector. Therefore, the tariff war has minimal impact on the export of such self-branded high-tech enterprises.
Another category that is significantly affected by the tariff war are subcontractors who take orders from U.S. brand owners. These enterprises often produce intermediates or integrated products, such as some enterprises that set up factories in Mexico and do not present themselves as Chinese self-branded enterprises. Enterprises like those that have established factories in the U.S. to support the American automotive industry, as well as CATL which once supplied to U.S. brand owners, all face a shrinking U.S. market share. That is to say, brand supporting enterprises that primarily target the U.S. market are significantly impacted by tariffs.
However, in the case of tech companies that were suppressed during their initial confrontation with the U.S., their dependence on the U.S. market has decreased significantly. Few new energy vehicle exporters choose the U.S. as a destination, so the tariff war has limited impact on them. At the OEM (Original Equipment Manufacturer) level, this differentiation becomes more apparent. Among them, OEM enterprises heavily reliant on U.S. manufacturers and those that have not transformed face the greatest impact. Meanwhile, OEM enterprises with market sensitivity either transform into self-branded enterprises or explore non-U.S. markets, reducing risks through diversified market layouts, thus experiencing relatively smaller impacts. It has become an important strategy for enterprises when formulating annual plans to diversify risks and avoid "putting all eggs in one basket."
It should be noted that among the enterprises currently significantly affected by the tariff war, some are enterprises that, despite the Sino-U.S. confrontation over the past two years, still harbored illusions and remained overly dependent on the U.S. market without timely adjusting their strategies. In contrast, some OEM tech enterprises that previously took orders from U.S. brands have successfully transformed into self-branded enterprises by mastering international standards and actively exploring non-U.S. markets, achieving good development results.
Finally, regarding traditional categories such as clothing and accessories, enterprises that are most severely affected are those excessively reliant on cross-border e-commerce platforms like Temu and Shein and view the U.S. as their core market. Due to severe path dependency, if they cannot quickly adapt to non-U.S. markets, they will face significant pressure in the coming period.
On April 2nd, Trump signed an executive order, and the U.S. officially abolished the tax exemption policy for small parcels imported from mainland China and Hong Kong starting May 2nd, formally canceling the $800 "small exemption" tariff policy.
In addition, even for Chinese self-branded whole machine manufacturers or enterprises that have pre-positioned themselves, if they cannot promptly find alternative markets, they will also be significantly affected. Under the current circumstances, I believe that Chinese enterprises need to actively seek diversified market layouts to reduce risks brought by single-market dependence.
Guancha Observer Network: Given that the U.S. administration changes every four years and midterm elections occur every two years, resulting in significant fluctuations in U.S. policies. However, some enterprises may adopt a mindset of "just wait it out," viewing the tariff war as a short-term trend. How do you view this mindset? Is it the same as the path dependency on the U.S. market? And what impact does it have on Chinese enterprises in the U.S. market?
Dani: I believe it is fundamentally still path dependency because businesses face immense pressure when transforming after past success. Generally speaking, running a business should focus on controllable matters, even though enhancing controllability means increased costs. Since 2018, China has been moving in this direction in certain fields. Larger enterprises place greater emphasis on the certainty of development, avoiding over-reliance on a single hit product or market, instead achieving "long-term peace and stability" through diversified layouts.
The advantage of large enterprises lies in their ability to convert external risks into internal ones. Mature enterprises can maneuver within risks using internal management mechanisms, strategic adjustments, and the continuity of their supply chains, hedging external risks with internal management. Small enterprises, however, are like a small boat in a great storm, with weak risk resistance. Some small enterprises that have grown by luck still hold expectations for external markets. If these small enterprises do not rapidly expand into non-U.S. markets, they will face elimination or sustained damage in this impact.
Regarding the volatility of U.S. policies, many countries worldwide experience market turmoil following government transitions. For instance, in countries like Sri Lanka, Nepal, Indonesia, and other African nations, businesses typically choose to observe during power transitions, as the new regime may overturn existing policies or maintain strategic continuity.
However, the current volatility of U.S. policies has reached an unprecedented degree. Its massive economic scale makes the impact of policy fluctuations far exceed that of other countries. The root cause lies in the extreme polarization of two ideological currents within the United States, which is not merely a problem of a single government or individual but reflects an extremely intense state of contention between left and right.
The U.S. tariff policies have dual objectives: on one hand, aiming to address domestic debt issues and impose them globally, with China being just one of the affected countries; on the other hand, there is an intention targeting China, and the叠加 of these pressures further exacerbates market risks.
In this context, high-tech enterprises perceive risks early and conduct global market layouts. For other enterprises, it is essential to invest substantial effort in developing non-U.S. markets. The current concept of "global minus one" (i.e., the U.S. returning to isolationism and the globalization rules formed by the rest of the world) is receiving significant attention, reflecting the trend of enterprises responding to U.S. policy risks and seeking diversified market layouts.
Guancha Observer Network: For most countries, Trump's "reciprocal tariff" policy has entered a 90-day moratorium phase. You mentioned earlier that even if Chinese enterprises set up factories abroad during his term, the U.S. might still restrict Chinese enterprises through equity penetration. In light of the current tariff situation, how do you view the situation of China's transit trade?
Dani: From my personal observation, when the Trump administration introduced the "reciprocal tariff" policy, many enterprises and logistics operators in Southeast Asia actually showed a certain degree of panic. During previous similar policy impacts, some local factories went bankrupt; while between 2018 and 2022, some enterprises benefited from transit trade but later suffered losses and withdrew investments due to changing external environments. From 2023 to 2024, driven by the overseas expansion wave, another batch of new enterprises joined the overseas ventures, showing a continuous trend of enterprises attempting to establish factories abroad.
From the perspective of actual tariff collection, the U.S.'s high tariff policy is actually unsustainable, as the average tariff rates in most regions globally are around 5% to 6%, and ultimately tariffs will reach a new equilibrium through negotiations.
However, it must be clarified that this tariff fluctuation will not change the general trend. The core objective of the U.S. is to adjust the trade pattern, promote the return of manufacturing, and strictly limit Chinese enterprises' transshipment or manufacturing through third countries. For instance, the U.S. has long been aware of Chinese automobile enterprises setting up factories in Mexico and photovoltaic enterprises establishing operations in Southeast Asia. Although different administrations may adopt varying methods, the intention to restrict Chinese transshipment trade remains constant.
I believe the most significant impact is on Southeast Asia. Affected by the Sino-U.S. trade friction, Southeast Asian countries have a complex attitude toward Chinese investment because this administration of Trump is quite explicit in its intention to block Chinese transshipment trade.
Due to the spillover effect of U.S. tariff policies, if Chinese enterprises set up factories in Southeast Asia, the host country may face "spillover sanctions" from the U.S. due to its trade ties with China, leading to high tariff risks for local enterprises exporting to the U.S. For example, some Southeast Asian countries had lower export tariffs to the U.S., but with the influx of Chinese enterprises expanding local export scales, the U.S. might view the entire country as a trade control target, raising tariffs.
This situation presents a dilemma for Southeast Asian countries, directly impacting China's transshipment trade in Southeast Asia, given the high economic interdependence between China and ASEAN.
Transshipment trade to the U.S. is essentially a short-term behavior, and alternative solutions are necessary.
Guancha Observer Network: For a long time, ASEAN has consistently ranked as China's largest trading partner. On April 14th, substantive negotiations for the China-ASEAN Free Trade Area 3.0 version have concluded. Among them, Vietnam, Thailand, and Malaysia, as core members of ASEAN, what are the characteristics of these markets? Continuing from your previous discussion, should China make any adjustments to its transshipment trade in Southeast Asia?
Dani: I believe that Vietnam, Thailand, and Malaysia have significant differences in their investment attraction strategies.
Thailand and Malaysia are similar to Mexico—they inherently possess certain industrial foundations but have high external dependencies, failing to effectively transfer industrial capabilities to domestic enterprises. Their economic model leans towards "processing on consignment" (a general term for four forms of direct foreign investment: processing on consignment, sample processing, assembly on consignment, and compensation trade), remaining foreign capital-dominated. Once foreign capital withdraws, the residual industrial capacity of the country is limited.
In contrast, Vietnam initially emulated China's model by adopting open policies to attract enterprises and requiring foreign enterprises to assist in upgrading the domestic industrial chain. Now, Vietnam has gained the capability to assemble electric vehicles, although core components still largely depend on China, it has achieved mass production of domestic products, demonstrating a significant improvement in its industrial chain. With the state's increasing support for domestic enterprises, Vietnam has implemented national industrial policies, becoming increasingly stringent in its requirements for foreign access.
However, from another perspective, Vietnam, due to its high dependence on exports and significant reliance on the U.S. market, faces unique pressures in economic cooperation. Last month, over 60 senior executives from U.S. companies, including Intel, Apple, Boeing, visited Vietnam for discussions, and Samsung has already established six manufacturing plants in Vietnam and continues to increase investment. As the Southeast Asian country with the strongest growth momentum, Vietnam clearly does not want its growth momentum interrupted, thus bearing significantly different pressures compared to other Southeast Asian countries in dealing with the U.S.'s "reciprocal tariff" issue.
Therefore, China's transshipment trade in Southeast Asia is inevitably impacted, but the specific effects remain to be observed. I believe that transshipment trade is essentially a short-term behavior, and under the current global economic situation, enterprises cannot rely on it as a long-term operating strategy. They must formulate alternative solutions for when transshipment trade is obstructed.
To this end, enterprises should adjust in two aspects: First, actively develop new products and vigorously explore new markets to break away from dependence on the U.S. market; second, gradually reduce the proportion of the U.S. market in overall sales. In fact, many enterprises have started to position themselves in non-U.S. markets or develop self-branded products in recent years. Looking back ten years ago, photovoltaic enterprises, due to sanctions from Europe and the U.S., relocated to Southeast Asia to set up factories and engage in transshipment trade. At that time, the U.S., due to its own energy shortages and high prices of domestic products, granted tariff exemptions for such "Southeast Asia-made" photovoltaic products, essentially an act of compromise after weighing benefits and drawbacks.
"Don't put all your eggs in one basket" is an important principle of business operations. Even French President Emmanuel Macron recently urged domestic enterprises to exercise caution in investing in the U.S., and Chinese enterprises should clearly recognize the current international economic and trade situation, accelerate diversified layouts, and reduce operational risks.
Macron Urges EU Companies to Halt Investment in the U.S. Video screenshot
Guancha Observer Network: This "tariff storm" has also drawn an interesting response from the EU. The day after the EU announced a 25% tariff increase on the U.S., the U.S. announced a 90-day deferral of the "reciprocal tariff." Subsequently, the EU also announced a 90-day deferral of its tariffs on the U.S. On the afternoon of April 8th, Commerce Minister Wang Wentao held a video meeting with European Commission Executive Vice-President Valdis Dombrovskis, and both sides expressed support for restarting the China-EU trade remedy dialogue mechanism to discuss trade diversion issues. Facing U.S. tariff pressures together, what further advancements do you think there will be in cooperation between Chinese and European enterprises in the future?
Dani: Overall, I think this is a good thing. There are various obstacles between China and the EU, such as the Russia-Ukraine conflict, which is a significant factor. So it takes some external impetus to bring China and the EU together. Just like our previous discussion about the "three walls," although the European market currently lacks vitality and its global competitiveness is declining, Europeans are still relatively approachable.
In contrast, the U.S. has not only restricted China with tariff policies recently but also needs to pay attention to two other things. One is that U.S. customs canceled the "$800 or less" "small exemption" policy; the other is that the "Executive Order 14117" came into effect last week, restricting "foreign adversaries" from accessing sensitive information of U.S. citizens in any form.
Currently, this regulation has impacted international payment platforms serving China's internet outflows because they have certain contact with financial information of U.S. citizens. In response, companies like PayPal and Square are undergoing deep adjustments. Recently, MicroSoft's outsourcing company, Weikang, conducted large-scale layoffs, primarily affecting about 2,000 people in the Microsoft project team in the China region. Moreover, since last year, Microsoft has closed all authorized physical stores in mainland China.
The U.S. is extremely sensitive to data security, and numerous bills and regulations have broad applicability, making it easy to interpret offenses ambiguously with "catch-all" characteristics. Some U.S. enterprise platforms cooperating with China have been forced to over-audit themselves, choosing to cut ties with the Chinese market, and some companies have had their global employees unable to access the company network within China for a long time. Currently, the implementation of this regulation by the U.S. government has created a certain degree of uncertainty risk in China's cross-border e-commerce, gaming, and online short drama markets.
So, the U.S.'s targeting of China is not limited to tariffs alone but involves national security, data security, and the development of key industries, among others. From this perspective, although Chinese enterprises often face operational challenges when dealing with the fragmented Europe, the European market is far less strict than the U.S. For instance, it is much easier for China's leading technology enterprises, ICT enterprises, and "three new" enterprises to enter Europe. The Chinese auto industry is expected to exhibit significant economic vitality in Central and Eastern Europe and Southern Europe, such as Spain, Hungary, and Poland.
MicroSoft's first joint venture in China reported to stop operations in China and lay off approximately 2,000 people. Reuters
Even without the U.S., will world trade still operate?
Guancha Observer Network: The current international situation is complex, and Trump's series of initiatives have brought China and the EU closer (for example, the EU's recent statement). China, Japan, and South Korea also held talks last month. Regional cooperation within the RCEP framework and interactions with the EU are profoundly significant for the global economic landscape. The U.S.'s indiscriminate tariff policy not only disrupts global supply chains but also exposes contradictions of domestic protectionism and hegemonic demands. Does this policy conflict objectively create space for emerging markets to build diverse cooperative networks? How should enterprises seize this opportunity to adjust their market layouts?
Dani: Actually, recently, due to the U.S.'s tariff policies, the question of whether globalization has ended has once again arisen. The answer, of course, is no. The U.S. cannot represent the globe, and Trump certainly cannot represent the U.S.; he represents only a portion of a divided faction within the U.S. These ideas are not new phenomena; they coexisted as a negative form even thirty years ago when the WTO was proposed. Whether it's foreign capital entering China or Chinese enterprises going overseas, they always face the博弈 of local protectionism and commercial cooperation forces, with national interest ideology and commercial empire ideology constantly competing.
The U.S.'s recent initiation of indiscriminate tariff wars has made many people start thinking about a question: Even without the U.S., will world trade still operate? During the early stages of the Russia-Ukraine conflict, some also believed that globalization was coming to an end, and in extreme cases, even proposed the idea of "hemisphericization."
Then, why does a tariff war provoke thoughts of the end of globalization? Mainly because many enterprises are overly dependent on the U.S. market, whether it's reliance on U.S. brand owners, distributors, or heavily investing in the U.S. market in cross-border e-commerce, all reflecting serious cognitive path dependence. On the other hand, some enterprises adopt transshipment trade to the U.S., which may be effective in the short term but is still difficult to sustain in the long run, and now many countries have already raised red flags against Chinese transshipment trade.
When doing overseas markets, we often tell other clients, "Don't just focus on one or two suppliers; you should consider us as your third supplier to activate your entire supplier system," and the client usually finds this very reasonable. In fact, this applies internationally as well; having multiple poles is always better than one pole, meaning that enterprises and countries have more room to diversify risks.
Now, U.S. policies exhibit great contradictions and uncertainties. Generally speaking, manufacturing and dollar hegemony cannot coexist. On one hand, the U.S. hopes for the return of manufacturing to its homeland and shows signs of isolationism overall. On the other hand, the U.S. still wishes to maintain dollar hegemony and continue "commanding the world." Whether these contradictory policies can achieve their intended goals is doubted by the outside world.
However, American enterprises, driven by capital efficiency, have overly transferred their supply chains overseas and exchanged technology and localization rates for markets, leading today to uncontrolled technology outflows, loss of competitiveness in domestic manufacturing, and company profits not returning to the U.S. homeland. Such cases serve as a very good warning for China. China now has many enterprises setting up factories overseas, so ensuring relative controllability of manufacturing is an important consideration in formulating future policies.
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