Perspectives from 30 business leaders on the trade war frontlines: preparing for the best, bracing for the worst
Survival strategies amid trade war 2.0, the realities of establishing US factories, and the future of globalization
After days of intense negotiation and escalating tensions, the global spotlight is sharply focused on China and the United States. Although a 90-day pause on 'reciprocal' tariffs offers temporary relief, uncertainty looms large, and it's unlikely tariffs will revert to pre-Trump 2.0 levels even if some agreements and compromises are reached.
Last week, I translated some field surveys and conversations to gather firsthand insights into how Chinese exporters are responding. Many were unprepared for the "worst-case" tariff scenarios and were primarily focused on surviving this year. As the situation unfolds, however, there is a noticeable shift towards considering longer-term approaches.
Today, we will be translating another excellent set of field interviews by the Waves, one of the most respected independent media outlets covering China’s business and technology scene. (This is the same team that interviewed DeepSeek's founder Liang Wenfeng in 2024, and we published the translation of the interview earlier this January.)
These interviews feature candid discussions and detailed surveys with over 30 frontline participants, including leaders from the automotive, consumer electronics, and renewable energy sectors. This article offers a direct glimpse into the complex realities Chinese businesses face amid these turbulent times, and starts exploring some critical longer-term strategies and broader questions: How will future global supply chains adapt around China? Is globalization still viable? How will companies like Temu and Shein pivot after losing the de minimis exemption? Is the U.S. market still essential for China's cross-border e-commerce? Why is establishing factories in the U.S. inherently challenging? And importantly, will Chinese investors continue to support the 'going abroad' narrative—a crucial growth trajectory we've highlighted repeatedly in previous editions of our Baiguan newsletter?
Below is the original article, "Perspectives from 30 people on the trade war frontlines: preparing for the best, bracing for the worst" by the Waves team.
Perspectives from 30 people on the trade war frontlines: preparing for the best, bracing for the worst
After 12 days of high-stakes brinkmanship, only two players remain at the negotiating table: China and the U.S.
Washington’s intention this time is explicit — to use tariff differentials to reshape global supply chains, deliberately excluding China from critical links while triggering a global game of economic alignment. The goal: re-shore manufacturing to the U.S. and force multinational firms to pick a side.
However, shifting multinational supply chains isn't a binary choice. It’s a complex, systemic operation. In reality, current U.S. policy pressure isn’t enough to trigger an immediate manufacturing comeback.
“No country can replace China’s role in global supply chains overnight,” said one long-time investor focused on outbound Chinese businesses.
Recent developments support that view. On April 11, U.S. Customs and Border Protection (CBP) issued updated guidelines on reciprocal tariff exemptions. Twenty categories — mostly Apple’s supply chain components and Nvidia’s AI server parts — were temporarily exempted. But the list is narrow.
But this small concession is far from a signal of safety. For Chinese firms newly entering global markets, real challenges have just begun. Ray Dalio, founder of Bridgewater Associates, argues that the real shock of the trade war lies not in tariffs themselves, but in what they signal — the breakdown of the global monetary system, political order, and geopolitical stability. "It's a once-in-a-lifetime shift."
In this systemic upheaval, Chinese exporters now face hard questions:
Should they exit the U.S. market or double down with local manufacturing?
Is Southeast Asia, Latin America, or Europe the next viable destination?
Will China’s role evolve from traditional exporter to full-fledged global e-commerce player — or will it be sidelined altogether?
More fundamentally, can newly emerging multinational Chinese enterprises still capture the benefits of globalization?
Over the past week, Waves, a news outlet by 36Kr (NASDAQ: KRKR), interviewed more than 30 individuals directly engaged in the tariff frontlines — from cross-border e-commerce operators and auto/new energy manufacturers to long-term overseas investors, legal experts, and trade policy researchers. All are based in the U.S., have over a decade of experience in their respective fields, and have weathered at least one full industry cycle. Their views differ — some cautious, others optimistic — but they share one core belief: there will be no clear end to the U.S.-China standoff anytime soon. It will evolve in fragmented phases, shaped by tactical compromises in specific sectors.
Given that Chinese firms’ global expansion will not halt amid external turbulence, adopting a mindset of preparedness—hoping for the best, but planning rigorously for the worst—is now both prudent and necessary.
Part 1: Cross-border commerce under pressure
Raise prices or absorb the pain?
For companies with strong brand equity and pricing power, the strategy is clear: raise prices.
Anker Innovations was among the first movers, increasing prices on Amazon by roughly 20%. A person familiar with the company said its U.S. market share remains stable despite the hikes. Pop Mart hasn’t adjusted pricing yet, but told Waves that it’s “not ruling out the possibility.”
One cross-border commerce insider noted that for companies like DJI, whose supply chain advantages are hard to replicate, rising costs may squeeze margins, but competitors will struggle to gain market share in the near term.“Tariffs are a toll, not a blockade. Only great products hold long-term passports,” Anker commented.
David Wei, Chairman and Founding Partner of Vision Knight Capital, put it bluntly: “If no one outside of China can replicate your product or supply chain, you need to believe in your irreplaceability.”
Contract manufacturers, on the other hand, have little choice but to endure the pressure, at least for now.
According to Waves, most ODM firms that rely heavily on the U.S. market are currently in a holding pattern, halting shipments and refraining from taking new orders for the coming months.
David Wei noted that this freeze isn’t limited to his portfolio companies: their peers across the sector are also stalling, and even U.S. importers have stopped placing orders.
Wei believes a resolution-or at least a temporary workaround-is likely within the next two to three months. Why? ODM manufacturers need to finalize production plans for Christmas orders by July or August. If the standoff drags on any longer, “America may be headed for a very empty Christmas.”
The death of the $800 loophole?
The so-called “small parcel” model was built on a U.S. customs provision known as the de minimis exemption. Under this rule, any package shipped directly to an individual consumer and valued under $800 could enter the U.S. duty-free.
This seemingly obscure policy became the backbone of cross-border e-commerce giants like Shein and Temu, enabling them to thrive in the American market. According to CBP, nearly 1.4 billion packages entered the U.S. via this loophole in FY2024, most originating from China.
But the reprieve is ending. On April 2, Donald Trump signed an executive order eliminating the de minimis exemption for packages from the Chinese mainland and Hong Kong. The White House followed up on April 8, raising tariffs on these goods from 30% to 90%, effective May 2.
This presents a major setback for small Chinese sellers who rely on platforms like TikTok, Temu, and Shein to ship low-value parcels without stocking local warehouses.
“Cross-border small goods aren’t half of China’s e-commerce exports — they’re three-quarters,” one industry insider told Waves. “Even if there’s some tariff relief, it only changes the numbers — not the nature of the game.”
A director at a listed company’s cross-border division was blunt,“If we have to declare full procurement costs under the new tax rules, we simply can’t sell profitably.”
David Wei views the collapse of the de minimis system — and the business models built on it — as almost inevitable.“It’s a domestic legal quirk that benefited only a few Chinese platforms and brands. It was never globally defensible.” As a result, cross-border e-commerce models reliant on small-parcel arbitrage will have to pivot — or perish.
That said, some insiders point out that more than 90% of shipments to the U.S. currently rely on "Gray Customs Clearance" — unofficial customs channels where third-party brokers help exporters bypass formal declarations at minimal cost. From their perspective, the new tariffs are more likely to disrupt clearance efficiency rather than kill off the model entirely.
As one industry veteran put it with a grin:
“The rougher the seas, the pricier the fish— but there’s always someone who knows how to swim through the waves.”
Will overseas warehousing define the future of cross-border e-commerce?
Yes — but not without risks.
Take Southeast Asia. Branden, a cross-border e-commerce operator, told Waves that since the beginning of this year, platform commissions on Shopee and Lazada in Vietnam have surged by 11%, more than doubling compared to a few years ago. In Thailand, sellers with cross-border qualifications saw a further 4% hike in April. Even before the latest tariff changes, many markets had already imposed additional VAT surcharges of 7–10% on small cross-border parcels. “But if you have goods pre-positioned in local warehouses,” Branden noted, “those hikes don’t bite as hard.”
Platforms are also shifting their algorithms to favor local fulfillment. A former Temu merchant told Waves that semi-managed models — where sellers use platform-recommended warehouses — now dominate search rankings. Products labeled with “local” tags get more traffic and conversions.
One executive at a leading overseas warehousing firm confirmed the trend. Even before the latest tariffs, they were at full capacity. “We had to start turning clients away.” He expects short-term demand for warehousing to rise sharply as existing sellers race to build offshore infrastructure. However, in the long term, he worries that the entire cross-border e-commerce market may shrink.
There’s a less visible but critical challenge: inventory risk. Even after shifting to a localized e-commerce model, sellers operating in high-SKU, fast-changing categories, such as fashion, struggle to forecast demand accurately. Deciding which SKUs to stock, and in what quantities, within the U.S. remains extremely difficult in the short term. In essence, while overseas warehousing provides flexibility, it also introduces significant execution risk.
Is the supply chain leaving China?
Absolutely. Today’s supply chains are no longer linear but deeply entangled systems. Completely bypassing China is unrealistic — but partial relocation is already unfolding. Southeast Asia and Mexico stand out as the most frequently cited alternatives.
Even before the latest round of tariff hikes, Ren Guang, an investor at Vision Knight Capital, had already urged Chinese firms to rethink their manufacturing strategies. His advice was twofold:
First, avoid switching entirely to self-production in one go. Instead, start with a blended model — combine in-house capabilities with outsourced support to strike a cost-efficient balance.
Second, map out a long-term manufacturing plan by building overseas plants, particularly in Southeast Asia, and evaluating end-to-end supply chain costs from the outset.
David Wei added that the majority of Vision Knight’s portfolio companies had already started this shift years ago. Today, 20–30% of their supply chains are now based in Southeast Asia.
Amid persistent U.S.-China trade friction, a viable strategy is to first export raw materials or semi-finished goods from China for overseas assembly and packaging. Over time, upstream production can gradually shift to local markets, supported by regional suppliers.
Michael, a cross-border e-commerce veteran, believes that for labor-intensive sectors like textiles and apparel, Southeast Asia is increasingly poised to replace China as the dominant export base to the U.S., thanks to preferential tariff treatment and lower costs. For Chinese factories heavily reliant on U.S. demand, securing new orders will only become harder. For consumer brands going global, relocating the supply chain to Southeast Asia, Mexico, or even Africa is a strategic necessity. The logic is simple: Southeast Asia wins on cost, Mexico on proximity, and trade access.
Yet building overseas capacity is no small feat. Labor management, logistics, quality control, and cash flow all become immediate operational challenges. According to Michael, cluster migration — relocating the entire supply chain ecosystem, upstream and downstream — is often the most viable approach. But such moves inevitably result in large-scale job losses and collateral damage to local service economies that support manufacturing hubs.
A case study from the book “Overflow” illustrates this well: Yue Yuen, a Taiwan-based shoe manufacturer, once employed over 200,000 workers in mainland China at its peak, with 100,000 in Gaobu Town, Dongguan alone. As production began shifting to Vietnam in 2008, only about 8,000 workers remained at the Gaobu facility. Importantly, only the final shoe assembly was moved offshore. “The upstream suppliers that remain in China are often the most critical links,” Michael noted. “They tend to be less affected — and in some cases, benefit from downstream relocation.”
Southeast Asia vs. Mexico: Which is better?
Southeast Asia > Mexico, most insiders say. Mexico has its appeal — it remains one of the few countries not hit by the latest round of U.S. tariff hikes. But David Wei cautions against overconfidence: “Many companies underestimate the complexity of rules of origin.” In an era of aggressive U.S. scrutiny, even relocating to Mexico may not shield companies from tariffs.
Ray Bu, a partner and lawyer at Fangda Partners, explained that the “rules of origin” determining tariff eligibility under U.S. customs law consist of two main components:
Obtaining a Certificate of Origin (CO) from the exporting country;
Satisfying U.S. Customs and Border Protection (CBP) requirements related to origin declarations, which depend on whether the exporting country has a trade agreement with the United States or qualifies under the Generalized System of Preferences (GSP).
The GSP is a U.S. trade program that allows certain goods from designated developing countries to enter duty-free — provided they meet strict origin and content rules. China, however, is not a GSP beneficiary country.
In short, the goal of these regulations is to prevent tariff avoidance through transshipment or minimal assembly outside of China.
Under the US-Mexico-Canada Agreement (USMCA), any product that incorporates non-originating materials, such as Chinese-sourced components, is no longer considered “wholly obtained.” To qualify for preferential treatment, it must either undergo substantial transformation or meet strict regional value content (RVC) thresholds (≥60% by transaction value, or ≥50% by net cost).
Yu Ke, head of global logistics at Minth Group, expects Mexico to eventually tighten its stance on China. Why? The U.S. believes Chinese goods are being rerouted through Mexico and Canada. To stay in Washington’s good graces, Mexico is likely to impose stricter rules. Indeed, Mexico is already cutting tax incentives and raising VAT exemption thresholds to encourage localized supply chains. "This mirrors China’s own industrial evolution from low-end assembly to full-chain production.
For Chinese firms, this means one thing: prepare early. “We now require our local suppliers to declare accurate origins and provide compliant certificates. There’s zero tolerance for false declarations,” Yu said.
What’s next for Temu and Shein?
Localization seems to be the only way forward.
In the wake of the de minimis exemption repeal, TikTok Shop recently issued a notice to U.S. sellers: starting May 2, all incoming shipments will face a 30% ad valorem tax, with an additional flat tariff of $25 per item before June 1, rising to $50 afterward. Carriers will also be required to post international bonds as part of the compliance framework. So far, Temu and Shein have yet to publicly announce specific countermeasures.
Ray Bu predicts that platform-based giants will be forced to accelerate full-scale internationalization, separating their domestic and overseas supply chains and localizing operations in major markets.
That pivot is already underway. According to an industry insider, both Temu and Shein are ramping up local presence in multiple countries, aggressively recruiting local merchants. Shein, for example, has been building production capacity in Turkey and Brazil — jurisdictions seen as tariff-safe zones amid the current climate.
Temu, for its part, plans to launch six “native fulfillment hubs” and nine “semi-managed hubs” between April and June. The former are geared toward local legal entities, while the latter target Chinese sellers with the ability to fulfill orders domestically in target markets.
Amid heightened tariff tensions, Temu signed a memorandum of understanding with DHL Group. According to the agreement, DHL will support Temu’s European operations through its logistics infrastructure, enabling Temu to scale its “local-to-local” model — a strategy in which local merchants sell directly to domestic consumers and complete fulfillment within the same region. Temu expects that 80% of its European sales will be generated through this model.
Beyond the U.S.—Where should cross-border sellers go next?
Europe is emerging as the top alternative.
According to Xue Yi, professor at the University of International Business and Economics, if access to the U.S. market becomes more restricted, the European Union may be China’s best substitute. As of 2024, the combined GDP of the EU’s 27 member states reached $19.4 trillion, with per capita GDP exceeding $40,000. Its consumer structure leans heavily toward: high-end manufacturing (German autos, Swiss watches), cultural and creative goods (French luxury, Italian fashion), and green technologies (Danish wind power, Swedish environmental tech) —all of which align closely with China’s dual push for manufacturing and consumption upgrades.
An industry insider told Waves that in the U.S., Temu is in direct price competition with Amazon. The platform’s pricing algorithm penalizes sellers whose listings exceed those on competing platforms. With its massive logistics scale, Amazon FBA often undercuts third-party providers.
But in Europe, Amazon doesn’t enjoy the same dominance. For instance, FBA fees in the UK run £6–7 per unit, which is £3–4 more expensive than third-party solutions, giving newcomers more room to compete on logistics and margin.
Indeed, Temu is already pivoting toward Europe. A senior operations director at a cross-border e-commerce firm said that Temu’s merchant recruitment team recently reached out, signaling that the platform is “doubling down on its European expansion.”
Japan is also being considered by some as a promising destination. While its population is just one-third that of the U.S. and average income is slightly lower, the income gap is narrower. “Even gig workers have disposable income,” one respondent said. “The economy is rebounding, and deflation is clearly fading.”