Liu Miao has sold clothing on Amazon to wholesale buyers in the United States for the past five years. That trade has come to an abrupt stop.
Mr. Liu owns a small factory in Guangzhou, long the center of China’s highly competitive garment industry. He and other factory managers, already dealing with tight profit margins, said last week that the combination of tariffs and President Trump’s new tax on cheap imports had cut deeply into their businesses. Costs along the supply chain are also higher.
The tariffs have made it impossible for Mr. Liu to continue selling on Amazon, where he previously made about $1 on every garment but now just 50 cents. And he felt he could not cut his employees’ pay, Mr. Liu said, as workers at a labor market crowded past his motorbike, which he had parked on the sidewalk with a dress sample draped over the handlebars.
“You can’t sell anything to the United States right now,” Mr. Liu said. “The tariffs are too high.”
Platforms like Amazon, Shein and Temu brought China’s vast manufacturing supply chain to the world’s doorstep. These online marketplaces made it possible for thousands of Guangzhou’s small factories to reach shoppers in the United States. And since packages worth less than $800 could enter the United States tax-free, the factories and, in turn, the platforms were able to charge very low prices.
Exports have been a major driver of China’s economic growth in the past few years. Business has been particularly good in e-commerce. In one Guangzhou neighborhood, foreign luxury cars — Mercedes-Benzes, BMWs and Cadillacs — were parked outside factories that pay workers about $60 a day to churn out clothing sold on apps like Shein and Amazon.
But now as trade tensions force the world’s two largest economies apart, many businesses in Guangzhou are facing a tipping point.
The tariffs compound multiple challenges facing the garment makers. It is getting harder to make a profit as the Chinese government has struggled to get consumers spending more after the collapse of the country’s property market. Without rising home values, many Chinese people are curbing their spending.
That hurt business for Zhang Chen, who used to own six clothing stores in the central province of Hubei. But when shoppers didn’t return after the Covid-19 pandemic and rent stayed high, he decided to close them all.
“In 2020, business wasn’t coming back, and in 2021, it still wasn’t coming back. By 2022 when it was still like that, it looked like it was never coming back,” Mr. Zhang said. Now he makes about $100 a day delivering freshly sewn garments to Shein collection points near the airport.
The factories in Guangzhou are not the automated ones churning out electric vehicles or the manufacturing campuses making semiconductors that are key to China’s yearslong drive to secure geopolitical resilience through advanced technology. Yet China’s garment factories employ millions of workers hustling to make a living.
In interviews, nine factory owners and managers in Guangzhou said they were considering relocating their operations, some to provinces like Hubei, 600 miles away, where they could pay workers lower wages. A few owners said they could possibly move to countries like Vietnam, where many Chinese factories have set up to avoid potential new tariffs as high as those already set on China’s exports.
Many reported declining orders. Others said they had suspended some production lines. All described watching neighboring businesses shut their doors in the past few months.
On Friday as the U.S. policy to end tax-free imports from China took effect, Liu Bin packed up his sprawling garment factory where piles of Shein packages pressed against the windows.
Mr. Liu’s factory specializes in dresses and tops meant to be worn to a beach party or a date night, and Shein typically purchases about 100,000 pieces from him a month. But in April, after the company ordered about half that much, he started moving his production line to the neighboring province of Jiangxi. He could no longer afford rent in Guangzhou.
Mr. Liu said that Shein was offering incentives to help cover the cost of moving operations to Vietnam, and he had considered it, “but then the tariffs on Vietnam got even higher, too.”
He said he had also tried to find buyers on TikTok and Temu, but orders were down on every platform. “They’re all falling, and we are only waiting and watching,” Mr. Liu said.
Shein did not respond to a request for comment. Temu said on Friday it had stopped shipping products from China directly to buyers in the United States.
The Chinese government has been encouraging domestic e-commerce platforms to help small businesses sell to their home market. But with China’s consumers being careful about spending, it will be hard for factories to sell as much domestically as they were exporting.
Han Junxiu, who sells novelty socks on Shein and Temu, said she doubted that the U.S. government would be able to suddenly start collecting tariffs on low-priced packages, which had been coming into the United States at the rate of four million a day.
“I just don’t think it’s that realistic,” Ms. Han said after closing her booth for the night at the Canton Fair, Guangzhou’s annual export trade show.
Fluffy socks for pajama parties are some of her most popular products.
This is exactly the kind of thing Americans will still need to buy from Chinese businesses, Ms. Han said. “Where else are they going to buy all this?” she asked.
Siyi Zhao contributed research.
