Not Angry, Bewildered
Dateline: Xiamen
Chinese entrepreneurs told me they aren’t mad at the U.S. after Trump imposed tariffs. They are bewildered.
On Friday and Saturday, I met with owners and managers of small private firms in Xiamen, a coastal city of five million people (bigger than LA). Walking on the beach before dinner, Kinmen, one of Taiwan’s outer islands, was visible about six miles away. No military was in sight, only couples posing for wedding photos. Xi Jinping served as Xiamen’s vice mayor in the mid-80s.
No one I met with in Xiamen expressed anger at the U.S. They had all followed Trump’s tariff talk since his first term, and sympathized with his desire to strengthen the American economy.
All of the entrepreneurs were, however, perplexed by Trump’s strategy.
One small business owner asked, “How does raising the price of imported consumer goods via tariffs would benefit Americans?”
Some of the businessmen export to the U.S. and said they enjoyed only single-digit margins, so would be unable to assume a significant share of the tariffs.
A company that makes components for light bulbs said that a majority of lighting sold in the US comes from China (or from Mexico with Chinese parts) so Americans would have to pay the new US tax or sit in the dark. (This may explain why, a day after that conversation, LED lights were on the list of goods that will be exempted from US tariffs. By some estimates, about one-quarter of all Chinese exports to the US will be exempted.)
A producer of nutritional supplements said no other country could supply the ingredients her company makes, so the American athletes and elderly who buy her products have no alternative source of supply. They will have to pay the full cost of the tariffs or do without the supplements. She did worry, though, that if there is a more than 100% tariff, many would choose to do without and her business would struggle.
A few entrepreneurs told me that their American clients asked them to pay half of the first round of Trump tariffs, but they all refused.
Several of the entrepreneurs noted that Trump’s decision on Wednesday to “pause” some of the tariffs suggested he finally understood that his new taxes would in fact be paid by American companies and consumers.
Chinese entrepreneurs told me that while they understood why Trump wants to promote high-end manufacturing in the US, they didn't understand why his tariffs covered a broad range of low-end intermediate and consumer goods.
Several had seen videos of Commerce Secretary Lutnick saying he wants an "army of millions and millions of human beings screwing in little screws to make iPhones" in the US. Chinese entrepreneurs laughed and said no one in Xiaman would take a job like that.
A factory manager pointed out that he had great difficulty finding staff to run his low-tech machinery. He relies on migrant workers from China’s poorest rural areas, and has to offer them a free dormitory room and meals in addition to an hourly wage. He asked how many Americans would want these low-wage, low-skill jobs.
One company told me that since Trump's first term, they had been reducing their exposure to the US and focusing on other markets, especially in Southeast Asia and the Middle East. This is consistent with data which shows that only 15% of China's exports go to the US, down from a peak share of 21% in 2002.
All of the entrepreneurs I spoke with said they agreed with their government's decision to push back with its own tariff hikes on American goods. They said Beijing had no choice, both because every government needs to be respected, and because Trump himself only seems to respect strength. They also supported their government's position that it continues to desire negotiations with Washington to resolve the dispute.
Everyone I met with also expressed sadness about the bilateral dispute and recent events in the US. Most of the entrepreneurs have family members in the US or relatives who had studied there and returned to China. "We used
to think we could learn from the US," I was told over dinner. "We used to look up to America." One businessman asked, "Why do Americans hate us?"
They were following reports of Chinese students having visas revoked, and said many students were afraid to return to China this summer for vacation, fearful that their visas would not be renewed, or they would be turned away at US airports when they returned. One businessman said a relative was unable to get his student visa renewed after returning to China for a family visit. Another businessman spoke of a relative who was giving up on completing a doctorate in the US after federal funding for his university's lab was terminated.
As I was leaving Xiamen for Beijing on Saturday night, the Trump administration announced tariff exemptions for consumer goods such as smartphones and laptops, as well as for semiconductors, suggesting that the president was severely shaken by the bond market’s reaction to his plans and was backing down. Hopefully, this will provide an opportunity for the two governments to begin looking for a sensible way out of this fight.
At this point, there don't appear to have been any high-level talks between the two governments, but on Sunday Lutnick said, "We all expect that the president of the US and President Xi of China will work this out. . . I am confident this is going to work out with China." In the same interview, Lutnick also said that the Saturday night tariff exemptions were only temporary and would be reinstated "in a month or two," because "we need to have these things made in America."
If the fight continues, everyone loses, but American companies and consumers are likely to lose more, given that exports to the US were equal to only 2.8% of China's GDP last year.
Andy Rothman
Andy.Rothman@SinologyLLC.com
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