Dozens of clothing factories in a manufacturing hub in southern China known as “Shayne Village” have been idle in recent weeks as a result of the Trump administration’s move to end the so-called “de minimis” exemption that allowed online retailers to sell cheap tax-free items to Americans.
The company, home to once-lively lively workshops in Guangzhou’s Panyu district, home to once-lively lively workshops that supply the huge scene of China’s first fashion, has now quieted down.
Until recently, these items frequently appeared in American consumers who purchased a small fraction of the cost of clothing sold by US-based retailers, thanks to tax-free international cargoes of less than $800.
“Orders from the scene have dropped this year, and our sales have dropped significantly,” said One Workshop, employing around 20 people. He spoke to a Japanese news agency.
Trump’s removal of the De Minimis policy, which takes effect on May 2, means that all shipments, regardless of size, are facing import taxes.
This policy ensures online retailers such as Shein and Temu remain competitive in price in the US market and are crucially supporting their business models.
This shift places additional pressure on China’s already struggling economy, which is plagued by problems. Most notably, especially in the weakening of the real estate sector.
Economic growth remained stagnant at 5.4% in the first quarter of this year, with no improvement since the last quarter.
“The workshops were closed everywhere in just two months,” Li Lianghua, a business owner who originally originally from Hunan Province, told Nikkei.
In light of the burgeoning trade war, Sheen is encouraging suppliers to relocate operations to Vietnam as part of a strategy to mitigate the impact of Trump’s policies.
However, small suppliers who have no financial ability to move are shutting down completely instead.
Li himself stopped accepting orders from Shein and shifted his sales strategy towards direct marketing on social media platforms.
Similarly, things are bleak in Dongguan, a manufacturing city in the eastern part of Guangzhou, where factories supplying leather goods and bags to American companies were already experiencing business decline, even before Trump’s recent tariff decision.
One Dongguan factory lost $150,000 worth of contracts from four major American clients by the end of 2024.
“There’s no chance of winning a new US contract, so we have to give up,” said Li Xiaodong, who recently took over the factory.
“Right now there is only risk in doing business with the US.”
Despite these set-offs, Liu’s business remains viable, generating approximately $3.4 million in annual revenue, primarily from the Asian market.
Liu has indicated plans to increase business within Asia further, highlighting faster and more affordable delivery options available in nearby markets such as Japan and Singapore.
Exports to China to China skyrocketed by more than 9% in March, but businesses were rushing to ship ahead of new tariffs, but industry insiders predict a major recession starting this month, with total tariffs kicking in by China’s imports.
Deflationary trends within China could ripple over other markets as Chinese manufacturers could seek new non-US customers, strengthen competition and lead to widespread price cuts.
“Price competition in exports to Asia will intensify,” he warned Chinese manufacturing executives, signaling a challenging era for global trade dynamics.
