Tariff uncertainty engulfs annual trade show in Hong Kong

HONG KONG — An annual global trade fair has kicked off in Hong Kong with no shortage of fanfare – featuring robots flexing, dazzling new products and excited crowds packing the convention halls.

But uncertainty over how the US-China tariff war may pan out cast a shadow over what is typically an upbeat trade show for exhibitors, mostly manufacturers from China plying their wares.

In a quickly escalating trade dispute, US President Donald Trump has hiked tariffs on Chinese imports to a staggering 145%. For its part, China has retaliated by imposing a broad-based 125% levy on American goods. The brinkmanship between the world’s largest two economies is starting to jeopardize the global economy, according to several exhibitors at the Global Sources Hong Kong show, which began on Friday.

It’s a tough time for Liu Tongyong, a sales manager for a company based in south China’s industrial heartland that makes keyboards and computer mice. His firm, Gaoxd Precision Industry, is based in the manufacturing hub of Dongguan and has benefited from the interlinked trade between the US and China. But the escalating trade war is hitting the firm hard.

On Friday, a US Customs and Border Protection notice indicated that some electronic products, including smartphones and semiconductors imported to the US would be exempt from Trump’s “reciprocal” tariffs. The White House later clarified that the exemptions are temporary. But the keyboards and mice Gaoxd makes do not appear to be covered by the exemptions.

At Gaoxd, sales have plunged around 20% since the beginning of this year owing to the uncertain economic outlook caused by the tariff war, Liu told CNN.

“Everyone’s in wait-and-see mode. If you’re sitting on inventory, it is unlikely you will be placing new orders anytime soon,” he said.

With the US market accounting for 30% of the company’s sales, Liu said the tariffs have increased pressure on them to cut costs further. But there are very few alternatives.

“There’s simply no room left to squeeze unit prices any further. After all these years, China’s manufacturing has already pushed costs down to the limit,” he said.

Moreover, shifting production overseas does not appear to be a viable option either, as the lack of supply chain and ecosystem abroad could further drive costs up, Liu added.

For now, Liu hopes businesses like his company can ride out the turbulence.

“People are just watching to see if there’s any sign this whole thing will settle,” he said.

As Trump ramped up tariffs on China in recent weeks, he has repeatedly expressed his desire to hold talks with Chinese leader Xi Jinping. Beijing, on the other hand, has adopted a defiant stance, vowing to “respond in kind” in the face of Washington’s “unilateral bullying,” while still keeping trade talks on the table.

It remains uncertain whether or when a trade talk between the two superpowers may take place.

Sky Wing Communication Electronics, another Dongguan-based exhibitor which manufactures acoustic products for predominantly American and Europeans customers, struck a similar tone to Gaoxd.

“Due to certain government factors, as companies, we have no choice but to accept them,” the company’s business manager Frank Zhang said. “We can only wait for these policies to stabilize and then explore different ways to overcome these challenges.”

Already, Sky Wing’s American customers, which contribute at least 30% of their sales, is in talks with the company about price cuts and even suspending orders, Zhang said.

The company has also put on pause its expansion to Cambodia due to the uncertainty of Trump’s “reciprocal” tariffs. Cambodia was subject to 49% of those tariffs by Trump before the US president postponed them for 90 days last week.

To counter the potential impact of the levies, Zhang said the company has been exploring new markets, such as in the Middel East, with an aim of diversifying beyond the US. But ultimately, he stressed that the “best news” for both the company and his US customers would be tariff reductions.

Businesses worldwide that have relied on China’s manufacturing capacity and efficiency, as well as its abundant labor force, will need to make adjustments, according to Bill King, president of Atron Electro Industries, a Canadian company that sources lights and electronic products from China and sells them to North America.

“There’s going to be a lot of pressure and it’ll be hard to see how the world will change because there’s going to have to be accommodations all around the world now,” he said. — CNN