Such a cautious trade deal between Washington and Beijing is leaving many small Chinese exporters struggling and on the brink of survival.
At a Glance
- A new U.S.–China framework restored a tariff truce, lowering duties from 145% to around 30–55%
- China agreed to ease rare-earth restrictions in exchange for capped U.S. tariffs
- Small Chinese exporters continue to operate at a loss despite the tariff freeze
- Loss-making industrial enterprises rose 3.6% year-over-year in April
- Delayed payments and wage arrears are growing threats among factory owners
Fragile Deal, Fraying Edges
A June trade framework forged in London has momentarily de-escalated the tariff war between the U.S. and China. Under the agreement, the U.S. capped duties on Chinese goods at 55%, down from previous peaks of 145%. In return, Beijing pledged to reduce restrictions on rare-earth mineral exports, essential for global electronics and defense manufacturing.
Despite the headline relief, the pact’s short-term nature has left Chinese exporters wary. The current deal expires in August, giving both sides just 90 days to lock in a more permanent arrangement. For many small manufacturers, that window may not be enough to recover from years of punitive levies.
Factories on the Brink
For exporters like Jacky Ren, who runs a kitchen appliance plant in Zhejiang, the truce feels too little, too late. “We are dying slowly,” he told reporters, as delayed payments from U.S. buyers stretch up to 180 days. To stay afloat, some firms are accepting orders at negative margins just to maintain relationships.
Official data from China’s National Bureau of Statistics shows that loss-making industrial firms grew 3.6% year-over-year in April. Factory utilization remains stuck at 74.1%, far below pre-trade war levels. Analysts note that while larger firms have diversified production abroad, smaller ones are trapped in a cycle of underpricing and debt.
Strategic Bartering, Structural Gaps
The new deal also reflects the evolving power dynamics of global supply chains. Washington used China’s rare-earth dependency as leverage, extracting policy concessions that benefit American tech and green industries. But long-term stability remains uncertain. Core issues such as intellectual property theft, forced tech transfers, and opaque subsidies remain unresolved.
Meanwhile, some U.S. firms have shifted their sourcing to countries like Vietnam and Mexico to avoid recurring tariff disruptions. This exodus has further weakened China’s SME export sector, which was once the backbone of its manufacturing engine.
Mirage of Recovery?
While the truce has temporarily halted the bleeding, it hasn’t reversed the damage. Small Chinese exporters remain in crisis, with many unable to survive another policy shock. As the clock ticks toward August, both sides face pressure to transform a fragile ceasefire into a sustainable accord.
Whether this is the beginning of renewed stability—or merely the eye of the storm—depends on what happens after the summer deadline. Until then, thousands of Chinese factories must continue operating on hope, grit, and increasingly thin margins.
