MARKET NEWS

BY Szu Ping Chan

The Great War of China. Dollar wreckoning. This memes war.

You didn’t have to look far for puns last week after Donald Trump hiked tariffs on China to 145pc and accused Beijing of a lack of respect.

China’s commerce ministry hit back hard, branding the levies “a joke” and imposing its own tariffs of 125pc, blowing up half a trillion dollars of trade in the space of a week.

But on the ground in Shenzhen – China’s high-tech epicentre linking Hong Kong to the mainland – tariffs are no laughing matter.

Winston Xiao is one of the thousands of business owners here increasingly nervous about what lies ahead.

“Right now we’re having conversations with our US clients,” says Xiao, who owns an electrical goods business. “Most of them are withholding purchases, so we are adjusting by downsizing, scaling and seeing how long this trade war continues.

“Buyers are not going to commit to purchasing goods when they don’t know how much they’re going to have to pay in two weeks or two months. So the uncertainty is basically grinding everything to a halt.”

Xiao, who did not want to use his full name, is paranoid about what might happen next. “The last thing I need is being flagged by US border and customs for saying anything that might not line up with White House policy,” he says.

But he is also defiant. He is one of many Chinese business owners who say Trump’s blame game is unjustified.

“People like me have been doing business with the US for decades. All the offshoring done by American companies during that time was for profit,” he says.

“They take advantage of China’s low cost, hard work and ingenuity, they squeeze our margins in order to pad their quarterly profits, and now they’re blaming us for their socioeconomic problems? That’s just hypocrisy.”

Xiao, who generates more than half of his company’s revenues in the US, adds: “Let me give you an example. Let’s say a manufacturer sells their product for $10 [£7.60]. About $6.50 would be material; $1.50 for direct labour; that leaves $2 as gross margin to cover overhead rent, utilities, etc. By the end, the factory will be lucky to make 50 cents, net.

“That same item lands in the US for about $12.5 – at least, before tariffs – to cover shipping and insurance, then the importer sells it to a retailer like Walmart or Amazon for about $22. Walmart then retails the same item at $49.99.

“Tell me, who’s taking advantage of whom in this case?”

There are already signs that Trump realises that shifting away from the world’s factory will be tougher than he first thought.

In another major climbdown by the White House, electronics such as smartphones and laptops will now be excluded from reciprocal tariffs – exempting roughly 23pc of US imports from China from steep levies.

However, despite the concession, Xiao says his fellow factory owners are prepared to hang tough. “Among my peers in the manufacturing sector, they think Trump is a bully. And you cannot back down to a bully.”

The word “bully” has become a common term used to describe Trump and the US on Chinese social media sites, although censors were quick to bury any posts mentioning the high tariffs imposed on Beijing while drawing attention to recent food shortages.

“America is fighting a trade war while begging for eggs” was one popular hashtag started by CCTV, China’s state broadcaster.