Tariffs bite, Chinese exporters seek footing in domestic market

by Zhao Xiaojuan

China's small and medium-sized manufacturers are scrambling to adapt as the United States ratchets up tariffs on Chinese goods, with many exploring domestic retail channels to offset slumping exports.

On April 8, the US announced it would raise its proposed 34% reciprocal tariffs on Chinese goods to 84%, on top of an existing 20% tariff. By April 10, the total tariff rate on some Chinese products reached 125%.

In Yiwu, a city known as the world's largest hub for small commodities, the effects were immediate. Huang Xin, a veteran trader of fan merchandise, called the situation the most chaotic in his more than ten years in the export business. Previously, his factory only accepted bulk orders of at least 1,000 units. Now, it is producing in batches of just tens of units to keep machines running and workers employed.

"Orders of just a few dozen are fine now. We’re taking whatever we can get," he told Jiemian News.

With around 20% of his orders previously bound for the US, Huang has been diversifying into Latin America, Europe, and the Middle East. Yet regional instability and shifting trade policies pose challenges there too. Shipments to Saudi Arabia and Israel have stalled, and while some US clients are rerouting orders through Mexico ahead of the 2026 World Cup, new tariffs on Mexican imports to the US are adding uncertainty.

Yiwu’s exports to the US totaled 83.6 billion yuan (about 11.4 billion dollars) in 2024, 14.2% of the city’s export volume, according to local customs. Top categories include textiles, toys, seasonal decorations, and small appliances—many of which are staple exports in Yiwu’s trade network.

Container shipment data reflect the impact. Weekly US-bound container orders plunged 67% to 169,000 TEUs, with Asian exports to the US down 63% to 54,000 TEUs.

In response, Beijing has begun supporting exporters’ transition to the domestic market. On April 10, the Ministry of Commerce convened retailers and industry associations to discuss how to connect foreign trade suppliers with local sales channels. Major supermarket chain Yonghui launched a dedicated program, inviting export-oriented producers to enter domestic procurement talks.

By April 9, over 200 companies had responded to Yonghui’s open call, with more than 100 in procurement discussions. The list includes suppliers of food, beverages, home goods, and personal care items.

One of them is Jiangsu Huateng Personal Care Products, a manufacturer of oral hygiene items that previously supplied Walmart and Aldi. According to company head Mu Longsheng, Yonghui approached them directly. Talks are ongoing, but Huateng expects to begin supplying toothbrushes and dental floss for Yonghui's in-house brands.

"This is our first time working with a domestic supermarket," Mu said. "It’s helped relieve some pressure and opened a new channel for us."

Huateng’s exports to the US accounted for 20% of its total orders. A March agreement with Walmart to split the cost of new tariffs unraveled in April after Washington’s further tariff hikes. "They've stopped ordering altogether," Mu said.

While Huateng sees potential in domestic retail, others remain hesitant. Huang Xin, the Yiwu trader, has yet to make a local pivot. He doubts there is strong demand for fan horns in the domestic market and lacks experience navigating retail distribution and pricing.

"Still, the machines can’t stop," he said. "We’ll have to face the headwinds."

At a press conference on April 10, Ministry of Commerce spokesperson He Yadong said the government would continue supporting exporters through initiatives such as the "Domestic Tour of Foreign Trade Premiums," aimed at easing market entry, boosting financing, and promoting domestic sales.

With trade flows shifting and tariff tensions rising, more exporters are likely to follow suit, hedging against geopolitical risk by turning inward.