There is a lot of trade war chat online at the moment... (March 2025)
Too many experts with contradicting opinions make it hard to separate the wheat from the chaff.
I wasn't comfortable having internet avatars shape my understanding of the situation. So I headed to Guangzhou in China to get a "boots on the ground" understanding of the tariff situation.
I took notes. I asked questions.
All with the aim of understanding the impacts of these changes whilst they're still unfolding. The stakes are pretty high for a lot of businesses, buyers and sellers alike.
Below are some anecdotes from Phase 2 of the 2025 Canton Fair. This fair is mind bendingly large. It occoupies the equivalent of 1900 tennis courts across a chain buldings.
Let's get into it.
1. Chinese manufacturers are motivated to sell.Link to section
US tariffs have changed "business as usual".
The convenience of having a large US buyer base is gone.
They don't want to lose US buyers, but are hedging so they can survive without them. Chinese manufacturers openly said they need to make deals with smaller buyers.
MOQs are more flexible than ever.
2. Developing nations stand to gain.Link to section
The fair resumed last year for the first time since COVID. Demographics of the attendees have changed significantly:
- Virtually no Americans.
- Barely anyone from the EU.
Attendance was dominated by Latin Americans; Colombians, Chileans & Argentines.
- Argentines were particularly vocal that the changes made by Milei have made manufacturing within Argentina untenable. Their local market has been forced open.
They need to import in order to compete and stay afloat.
- Colombian and Chilean buyers skewed younger than any other demographic at the fair. Seems like a new wave of entrepreneurs is taking hold?
Central and South Asians are a close second.
Indian and Pakistani presence focused in construction materials & building supplies sectors. Many making introductions in the ceramics and floor surface areas.
Unsure if they are buyers or getting ideas to bring home for local production. India is a major producer and has displaced a lot of Italian and Spanish businesses.
3. If in doubt, outsource?Link to section
Manufacturers are restructuring their businesses.
Those that can are actively seeking to move manufacturing.
Lower value goods are being shifted to nearby countries to circumvent the tariffs and continue selling to the USA. Some manufacturers mentioned the added benefit of accessing lower wage workers, but this seems like a secondary benefit.
Destinations depend on the product, but factories are moving to:
- 🇻🇳 Vietnam → (everything)
- 🇮🇩 Indonesia
- 🇮🇳 India → (ceramics, tiles, textiles)
- 🇳🇵 Nepal → (textiles)
Manufacturers overwhelmingly prefer Vietnam, but increasingly struggle to find available warehouse and factory space. Those that initiated the move a few years ago are stoked with their decision.
4. Uncertainty. Reshuffling.Link to section
Many stories of manufacturers with latent stock waiting on Chinese soil. They have "container loads" of goods grounded as they wait for clarity.
There is a flurry of innovation as Chinese/US businesses figure out how to navigate the change. Strategies are as follows:
- Cut your losses. US buyers are walking away from already produced goods leaving factories holding the bag. The sellers willing to take a pay hit for the convenience of getting rid of the headache.
There is a glut of goods that need to be shifted.Cheap goods will flow to any country that allows them in.
- Delay. Some shipments are being delayed as new arrangements are found. Shipping to bonded-warehouses or transshipment destinations are in hot demand!
5. Name dropping.Link to section
Manufacturers openly share who their clients are, boasting about the volumes and detailing product specifications they require.
Not sure if this is a new thing, but the willingness to share key information was astonishing to me.
If you want to do competitor research, nothing beats a face to face meeting and a bit of banter.
6. Busy one day, less so the next.Link to section
Despite the strong turn out on the first couple of days, a few Canton Fair veterans mentioned they've never seen it so quiet.
It was pretty much empty on the last couple days.
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The scale of this event (and country) is hard to grasp. It was an awesome experience.
China is a fascinating place. The people are lovely.
I strongly recommend you visit. You will be blown away.
That's it.
Cheers,
Loic