China, Yiwu- November 26: Foreign clients will select festival items at Yiwu International Trade City, China on November 26, 2024 in Yiwu, China.
Hu Xiao/VCG via Getty Images
For years, Christmas items have previously hit US shelves as retailers seek to take advantage of the profitable holiday season. This is a retail phenomenon known as “Christmas creep.”
However, tariffs can become a Grinch that disrupts the end of the year festival, as factories in China and their US buyers navigate tariff uncertainty and ensure that shelves have enough stock in time for Christmas.
Shortly after US President Donald Trump announced the sweeping fee on April 2, it included a 34% tariff on imports from China, which later rose up to 145%, but many US retailers responded by halting orders from Chinese suppliers and forcing factories to produce according to an interview with CNBC.
However, industry representatives say some production has resumed in the past few days as concerns about business disruption and missed opportunities outweigh tariff uncertainty.
“If we don’t start producing in the coming weeks, Black Friday and Christmas will start to disappear,” said Cameron Johnson of Tidalwave Solutions, a Shanghai-based senior partner, Shanghai-based, in a phone interview Tuesday.
“Both sides are trying to be somewhat flexible,” he said. “If these supply chains go down, it will be much more difficult for retailers to nurture and implement them. [again]. ”
Johnson explained how a pause at a factory order that makes spoons, for example, would affect a company that rolls steel, similar to an iron ore smelter. “These supply chains themselves, the upstream, are beginning to close. When they close, things take time, even if there’s a kind of deal. [restart]. ”
Despite rerouting some Chinese-made goods through other countries, exchanging existing supply chains and transportation schedules is difficult to achieve overnight. According to an analysis by Goldman Sachs at the beginning of April, 36% of US imports from China could only be sourced from mainland suppliers.
For example, electronic products must be shipped from China by early September to reach US shelves just after the Thanksgiving holiday at the end of November, according to Renaud Anjoran, CEO of Chinese electronics manufacturer Agilian Technology. The Guangdong-based company distributes half of its products to the US market.
According to Anjoran, it would ideally take about six months for the supplier to start preparing these orders in March to manufacture, test, assemble and package them.
Reduced shipping
Many US buyers began stockpiling stocks late last year and expected higher tariffs after Trump took office. As frontload continues, China’s exports to the US increased 9.1% in March from a year ago, while imports fell 9.5% year-on-year, according to calculations from CNBC’s official customs data. Trade figures for April are scheduled to be released on May 9th.
However, these frontload efforts are beginning to diminish. According to Morgan Stanley’s tracking of radio frequency transport indicators, the number of cargo vessels departing from China to the US has been declining sharply in recent weeks. According to the investment bank, cancelled shipments also skyrocketed 14 times in the four weeks from April 14 to May 5.
According to the National Statistics Bureau, in April, the measure of new export orders from Chinese factories fell to lowest levels since the second half of 2022.
“We don’t have many purchase orders in the coming months from American customers right now,” Anjoran says. Most of his clients stockpile stockpiled stocks shipped to the US before Chinese New Year at the end of January, with some orders flowing in March and April.
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Some US buyers are waiting to see if tariffs will be reduced to more acceptable levels in May before reopening freight, Ryan Chao, director of Willows in Jiangsu, told CNBC. For now, the company has put on hold orders from its US clients.
Recent reports pointed to tariff relief on the ground as both governments sought to blunt the economic impact of punitive tariffs. China reportedly granted tariff exemptions on certain US goods, including pharmaceuticals, aerospace equipment, semiconductors and ethane imports.
In the latest relief, Trump has signed an executive order that exempts foreign automobiles and parts imports from additional taxes following previous rollbacks of tariffs on various electronic products such as smartphones, computers and chips.
I’m trying to get the timing right
Despite concerns about profit margins, some companies are hedging bets by partially filling orders from China, rather than enduring the sight of empty store shelves.
Martin Crowley, vice president of product development at Seattle-based wholesale toy seller Toysmith, said in an email Tuesday. The company’s website urges customers to place orders by May 16 for shipments “to lock in current unstricken pricing” by July 31.
Over the past few days, many factories in Yiwu, Shantou and Dongguan manufacturing centres have received clearance from Walmart and Target to resume production, Crowley added. Walmart and Target did not respond immediately to CNBC requests for comments.
Some Azilian customers have placed relatively few orders and bet that tariff charges will fall by the time the products arrive at US ports.
However, if a breakthrough in US-China trade negotiations occurs, and the rush to curb the orders continues – could raise factory production costs and shipping prices.
“If the quantity is not large, it is possible to quickly place production faster. However, if all American customers are in a hurry at the same time, the factories will be overwhelming and air transport will be very expensive,” Anjoran said.
