Chinese businesses view tariff pause with caution and uncertainty

BANGKOK (AP) — While U.S. President Donald Trump has talked of victory after reaching a weekend deal with China to reduce the sky-high tariffs levied on each others' goods, businesses in China are reacting to the temporary deal with caution.

The U.S. and China have cut the tariffs levied on each other in April, with the U.S. cutting the 145% tax Trump imposed last month to 30%. China agreed to lower its tariff rate on U.S. goods to 10% from 125%. The lower tariff rates came into effect on Wednesday.

U.S. Treasury Secretary Scott Bessent, announcing the reduction in tariff rates this weekend in Geneva, had said, "We do want trade." While the markets have responded to the agreement with gusto, rebounding to the levels before Trump's tariffs, business owners remain wary.

Businesses like one kitchen utensil factory in southern Guangdong province were eager to get back to work. The business said they put at least four orders from their American clients back into production on Tuesday after the tariff pause was announced.

“We thought the negotiation would bring the tariffs down a bit, but didn’t expect it would be so much,” said Margaret Zhuang, a salesperson for the utensil factory in Guangdong province, one of China's manufacturing hubs.

The two countries are now planning to start negotiations for a longer-term deal.

Kahlee Yu, sales manager of Yangjiang Hongnan Industry and Trade Company, which also manufactures kitchen utensils, said he was reaching out to American customers again. “We’re a little bit optimistic about the trade deal between the two sides. But it is still possible the tariff policies will change again, resulting in no orders from our American clients," he said.

However happy they were in the moment, the damage from tariffs announced in April has already been done, Zhuang added, as they are seeing fewer orders. Currently, she has orders for products up until June. Earlier this year, before Trump’s trade war began, they had orders for production extending to August.

The uncertainty also means companies are less willing to make new investments. Kelvin Liao, sales director at Action Composites, a manufacturer of carbon fiber auto parts in Dongguan, a major city in Guangdong, said he was originally planning to buy a piece of land to build a new factory, but opted instead to rent because of the tariff situation.

“It is good to reach a trade deal between the two countries. But people have already lost confidence in Trump, and we will take a wait-and-see attitude," he said. “We believe the signing a trade deal is just a pause and the ultimate goal of the US is to curb China’s development.”

Tariffs also remain in place for some industries, which are not part of the general deal. Hong Kong businessman Danny Lau, who owns an aluminum-coating factory, said his company still faces about a 75% tariff from tariffs levied at different points since 2018 by the U.S. Still he welcomed the news from the weekend, saying he would reach out to existing American customers to gauge their views.

“Although the policy change doesn’t cover our industry, we hope talks will continue and there will be better news during the 90-day pause,” he said.

In April, some Chinese businesses said they would focus their attention on exporting to other markets, given how high the American tariffs were. Analysts said previously that the tariffs could cause Chinese businesses to diversify their supply chains and move part of their manufacturing capacity abroad, including to the U.S.

Liao, the auto parts manufacturer, said his company already has a factory in Vietnam, and the products there were exported to the U.S.

"We don’t believe that the US has the ability to produce the products like ours with lower costs. We will not give up on the US market.”

—-

AP researcher Yu Bing contributed to this report from Beijing. AP writers Kanis Leung in Hong Kong and Fu Ting in Washington contributed to this report.