Live From the Trade War 2: China's Herculean Economic Mobilization - and an American Reshoring Story

An interview with a multi-million dollar Guangzhou exporter on the rapidly shifting situation on the ground and his coming U.S factory

This is part two of “Live from the Trade War”, a series following the fallout of Liberation Day from on-the-ground in China. Expect more interviews with Chinese suppliers, logisticians, and scholars. Image source: The Australian

Liberation Day shocked the world. Since that day, international media has rightfully been preoccupied with reporting on world history’s most expensive drama. Every Truth Social post, every internecine advisor squabble, and every subtle easing of tone.

What’s been surprisingly under-examined in the Liberation Day fallout is none other than the primary target, China. Quietly, a nation-wide effort has rapidly coalesced to withstand the U.S in what has quickly become a cross-Pacific economic total war.

China’s central government, alongside provincial and local governments, are pairing up with U.S – exposed exporters in a truly immense range of state and public-private programs to re-route billions of dollars in trade and muster even greater sums for short-term funding and assistance.

Chen is one of those exporters. His factory this year was projected to gross nearly $10 million dollars from U.S clients, which is only his second biggest market behind Indonesia. Since Trump fired the first shots of war on April 2^nd, Chen has been busy.

His experience over the past month shows the dizzying array of mitigation strategies – state and private – that have been mobilized in just the span of a couple weeks. Programs marshaling billions of dollars have materialized that didn’t even exist before April.

Any analysis you’ve read from two weeks ago is already outdated. Any analysis you’ve read from a week ago probably already is too. It cannot be stressed how quickly things are changing on the ground. That being said, let’s take a peek into Chen’s company over the past month and see what we can learn.

April in Guangzhou

The first thing that stands out in Chen’s busy month is the fast-acting support of the local, not central, government in Guangzhou. “Our government is helping. Right now, I’m applying for a loan to [pay] my workers. The local [Guangzhou] government is helping lower taxes and cover some expenses this month.” Low-interest rate loans to “ensure cashflow to purchase raw materials and pay salaries” are helping firms in China’s biggest manufacturing cluster bear the short-term impact as they wait for a trade deal.

That’s also been matched by a strong government push to help Chinese exporters find buyers in Europe, Africa, Latin America, and South America. “Three weeks ago, I attended a lot of [local government-led] seminars, which gave me the opportunity to connect with purchasers in other countries. Mostly European countries, like Italy and England. [Also] Africa, Southeast Asia, and Russia. England is a huge, huge opportunity for us.”

This interesting mix of public-private coordination is turned truly into a Chimaera when Chen’s main source of new buyers from these seminars is revealed: TikTok shops. Yet less than a month ago, TikTok Shop didn’t even exist in Germany, France, or Italy. Major global flows are going through pathways that are barely older than Liberation Day itself.

TikTok has become central to China’s public-private mass-mobilization, as local governments all across China try to come up with ways to shield local consumer goods manufacturers from the trade war. This has no doubt also been a national priority, evidenced by TikTok’s recently unveiled plans to enter Japan’s online shopping market. Expect TikTok, especially in relation to its presence in the U.S, to only grow in controversy as the U.S and China’s geopolitical rivalry escalates.

For Chen, it’s provided a crucial source of orders to replace the loss of his second biggest market, “I’m still busy because I have a lot of new Latin American and European companies putting in orders. A lot of TikTok brands come to our factory to order new products, and this will be a big opportunity for us to enter [these] markets.”

But, even with the TikTok-fueled export-push, pain is still on the menu. Chen reported that many Guangzhou exporters have put their employees on unpaid leave until mid-May. He himself will likely have to layoff some employees, “My first priority is to make fast moves to find new clients, and my second priority is to cut down our workforce. We are now evaluating people in every department, and will pay some severance [for them] to leave and save labour costs.” According to Trivium, Chinese Premier Li Qiang stated that the central government is prepared to help businesses keep workers on payroll, signaling that the costs of this trade war on employment are not lost to China’s economic planners.

April in the United States

Now that we’ve tallied the fast-shifting situation on the ground in Guangzhou, let’s jump to the U.S. What are major U.S importers doing now that they weren’t doing a week or two ago? And what about re-industrialization, is international investment really flocking to U.S shores?

Well, it’s a mixed picture. And it will only get clear once we have some real, hard numbers. Contradictory trends are appearing and it’s not clear which trends are the strongest.

For instance, take “empty shelves”, the media’s new favourite catch-phrase. The data that we do have access to seems undeniable – empty shelves are coming. Trucking volumes out of LA are at a near-COVID low and bookings out of China fell 60% in one week as the Port of Los Angeles’ total import volume dropped 35%. Container volumes across New York’s ports are expected to be down 40% YoY by Friday. Companies are also in the middle of planning purchases for holiday seasons, meaning the fallout of this highly disruptive environment will likely impact economic activity through the end of the year.

However, according to Chen, there are green shoots. “This is very, very uncommon but some U.S companies have called factories back to renew production and they don’t care about tariffs[…] Walmart, Costco, Target. They said they don’t care about the taxes and will just pay it because there’s a shortage right now. Some stores cannot change their supply chain because they’re finding suppliers in other countries aren’t able to provide the same quality for the same price as Chinese factories.” This was also independently reported by a Singaporean news site.

If shipping data is anything to go by, the scale of these orders is small, but ramping production back up will also take time to bear out in container data. I would guess that big box retailers, staring down the prospects of empty shelves, are mitigating them to the extent possible by continuing orders of high-margin products and selling them near-cost. However, almost everything else is likely on hold indefinitely. That means empty shelves.

Now, what about re-industrialization? Has foreign investment materialized yet?

First Movers or Crazy Cowboys?

On Sunday, the South China Morning Post published an eye-catching article.

Seductively titled “Chinese firms race to open US factories to avoid sky-high tariffs”, it lays out the stories of a few different Chinese exporters, working in fields as diverse as novelty gifts, petrochemicals, printed mugs, electronics, and t-shirts, on a mad dash to build factories in the U.S and get on the other side of the tariff wall. Something like this makes one think that the tariffs might actually be working…

Here, in the absence of clear data, we can learn some things from Chen.

Chen was ahead of the curve. He started construction on a new, U.S-based factory months ago after the first tariff jitters spread through the market. “We began at the start of 2025. Other companies told me they will establish factories in Vietnam, Malaysia, or Latin America to avoid tariffs; but I think American customs can identify it’s still a Chinese company and will [soon] have some sort of other policy to stop Chinese companies.”

Construction on his plant has continued apace throughout the tariff war, but some problems have become immediately apparent. Supply chains cannot be simply split into “importer – consumer” and “exporter – manufacturer” boxes, the process of manufacturing requires a wide array of imported inputs such as machinery, raw materials, and intermediary goods. Manufacturers are simultaneously importers and exporters - and many aren’t even exporters!

In Chen’s own words, “When we establish the factory in the U.S, we will get all the raw materials from China. We cannot purchase them in the U.S[…] But if you import them, it’s very competitive.” When asked what he’ll do if tariffs stay high, he was still insistent on the unsuitability of domestic production. “We’ll import the raw material from Europe or some other high-standards overseas company, so we’ll find a way. But maybe very high costs.”

Chen’s experience is matched by other Chinese firms looking to re-shore production to the U.S, many of whom are now getting cold feet as plant construction costs have doubled in some instances due to tariffs on Chinese machinery that cannot be sourced in the U.S. There’s nothing unique here about these Chinese firms, American companies gauging the viability of building plants in the U.S face the same issues importing machinery and costing out inputs.

Just like the earlier story of big box retailers resuming some orders, contradictory trends amid a low-information environment leave us with little to say besides guesses. In the short term, uncertainty over long-term tariff rates and a worsening macroeconomic environment are likely to dramatically decrease foreign and domestic investment in U.S manufacturing. Paired with high tariff rates on necessary inputs and machinery to start up production, re-shoring stories like Chen’s are likely to animate online discourse but be lost in a sea of negative data. As I reported previously, U.S – Chinese business relationships are stubborn and hoping to wait out a crisis they perceive will resolve shortly – and will end disastrously if not.

None of this points to anything good.

Final Note

While writing this article, I’ve been shocked by the paucity of high-quality data available. Twitter chatter from logisticians and reporters is just that – chatter. Whispers, rumors, and disconnected stories that are impossible to piece together into any real account of the stakes of the current moment without solid data.

Are Chen and the SCMP exporters part of a greater trend? Is TikTok really helping reroute billions in trade? We don’t know, and we likely won’t know for months.

At a critical moment when the world’s two largest economies are flirting with a catastrophic decoupling, nobody knows what the hell is going on. In the words of a Texas Manufacturing Outlook respondent, “The risk we face is now is larger and less understood than what we saw during the COVID shutdown.” That’s not something you want to hear.

This is part two of “Live from the Trade War”. Click here for part one and subscribe to notified of future installments. Thank you.