Xi to visit Southeast Asia amid China’s grievous export crisis

China has vowed to “seek common ground and shelve differences” with Asian neighbours after the United States imposed a 145% tariff on all Chinese goods on April 9. Chinese President Xi Jinping will pay state visits to three Southeast Asian countries – Vietnam, Malaysia and Cambodia – from April 14 to 18, according to the Chinese Foreign Ministry.

This display of interest is not surprising in the context of the sharply escalated trade war with the United States. Many Chinese exporters are describing on social media huge losses that they say they have suffered due to US tariffs.

The South China Morning Post reported on April 9 that, to avoid tariffs, some Chinese exporters abandoned their goods mid-voyage to the US – mainly by surrendering containers to shipping companies. If they had not done so, they would have had to pay a 145% tariff at the US Customs, meaning that their revenue would not be enough to cover the tariff. Even after they dumped their goods, they still had to pay their suppliers.

On to one of the elements of Beijing’s Plan B: Xinhua on Friday (April 11) published three separate stories to highlight China’s long-term friendships with Southeast Asian countries:

• “Tradition, tea, and tomorrow: Xi Jinping’s stories with Vietnam” (in which Xi describes China and Vietnam as “comrades and brothers”);

• “‘Flowing water cannot be severed’ – How Xi Jinping promotes China-Malaysia friendship” (in which Xi praises Fujianese businessman Tan Kah Kee [1875-1961] for his contributions in Malaysia); and

• “Feature: Xi Jinping and his ‘ironclad friends’ from Cambodia” (in which Xi describes former Cambodian King Norodom Sihanouk as “a revered friend of the Chinese people and a symbol of China-Cambodia friendship”).

(That last article does not note that in 1970, encouraged by China, Sihanouk endorsed the Mao Zedong-supported Khmer Rouge – who went on to commit the Cambodian genocide of 1975-1979.)

To ignore tariff escalations

On Friday, China announced that it would raise tariffs on American goods to 125% from its previous rate of 84%, matching the level announced by the Trump administration on Thursday. However, the White House clarified that the tariff imposed on Chinese goods is now 145% if the earlier 20% levies applied for fentanyl trafficking are included.

As American goods exported to China already have no market viability at current duty rates, Beijing will “simply ignore” any further tariff escalations from the US in the future if Washington “persists with its tariff number games,” said the Customs Tariff Commission of the Chinese State Council.

“Even if the US further raises tariffs to even higher levels, it would be economically meaningless and would ultimately become a laughingstock in the history of global economics,” it added.

According to China’s General Administration of Customs, China imported $162 billion of American goods last year, which accounted for about 6% of the country’s total imports of $2.7 trillion. These products include 875,700 tons of cotton, 21 million tons of soybeans, 2.07 million tons of corn, and 9.64 million tons of crude oil. China also imported aeroplanes and semiconductors from the US.

Some observers said China can source commodity products from Brazil, Argentina, and India; semiconductors from Taiwan, Japan, and South Korea; and airplanes from Malaysia and Singapore. These countries may focus more on Chinese customers while American exporters get others.

The main issue is how Chinese manufacturers can quickly clear their inventory and adapt to the new environment.

Willy Lin, chairman of the Hong Kong Shippers’ Council, warned that exporters who dump shipments mid-voyage will face legal disputes and potential damage claims from customers.

Caixin reported on April 10 that many Chinese exporters delayed or canceled their shipments to the US. In Shanghai’s Yangshan and Waigaoqiao ports, unshipped containers are piling up, waiting for exporters to retrieve their goods or change their destinations.

A Chinese exporter told the SCMP that due to the imposition of US tariffs, its shipments to the US fell from 40-50 containers per day to 3-6 containers.

Exporters’ losses

On social media, a sock maker in Zhejiang said her company’s gross profit fell from about 400,000 yuan in 2023 to 100,000 yuan last year. She said a customer ordered one million yuan ($137,311) of socks last year but did not collect them. She said she has no customers this year and can’t pay 60,000 yuan in rent. 

A cloth maker said the cloth market remained undersupplied several weeks ago, but now his company cannot sell half its products. A hat maker in Yiwu said he could still ship his products to the US if the tariff were 20-30%, but he now has no price advantage as the tariff is more than 100%.

A Shanghai-based YouTuber said exporters delayed their shipments to the US as they didn’t know whether the US tariffs would continue to increase during their products’ voyage, which usually takes about two months. He said if the US tariffs become stable later, Chinese exporters and American buyers can compromise on tariff payment and resume shipment.

Meanwhile, many US buyers, including Amazon, have reportedly stopped ordering products from China or canceled their orders after Trump imposed a 104% tariff on Chinese goods on April 9.

A research report by Central China Securities said the US “reciprocal tariffs” will hurt China’s economic growth in the short run, but China still has an advantage in producing some electronic and textile products over the long run. It said China will probably unveil stimuli to boost domestic consumption and absorb the unsold products.

Long Live Sino-Wherever Friendship!

Back to Xi’s trip and all that friendship: In recent years, tensions between China and Southeast Asian countries, including Vietnam, Malaysia and the Philippines, have heightened due to the South China Sea dispute.

Additionally, damming of the Mekong (Lancang) River upstream in China for hydropower affected downstream areas of Thailand, Laos, Cambodia and Vietnam.

On April 8-9 of this year, Xi delivered an important speech at a central conference in Beijing on work related to neighboring countries.

Xi, who is also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, called for building a community with a shared future with neighboring countries and striving to open new ground for China’s neighborhood work.

“China will uphold the Asian values of peace, cooperation, openness and inclusiveness, use high-quality Belt and Road cooperation as the main platform and pursue the Asian security model that features sharing weal and woe, seeking common ground while shelving differences, and prioritizing dialogue and consultation,” Xi said.

“China’s relations with its neighbors have been at their best since modern times,” he added. “The collective rise of the Global South has become an essential force in promoting multipolar development.

“China will actively promote cooperation under the frameworks of the Shanghai Cooperation Organization, East Asia Cooperation, APEC, and Conference on Interaction and Confidence Building Measures in Asia (CICA). It will initiate the China-Central Asia Summit and Lancang-Mekong Cooperation, host the Conference on Dialogue of Asian Civilizations (CDAC), build multi-level and cross-field cooperation platforms, and work with neighbouring countries to practice true multilateralism.”

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