“It felt like finally being pulled from the river to dry land,” said Chen Li, a bulk apparel trader in Yiwu, moments after the US and China released a joint statement on May 12 from their Geneva trade talks. He wasted no time contacting his US clients: “We need to get these shipments out immediately.”
According to statements released, the US agreed to cancel 91% of the tariffs it imposed on Chinese goods on April 8 and 9, while China committed to lifting 91% of its retaliatory tariffs. Additionally, of the 34% reciprocal tariff announced on April 2, the US will suspend 24% of that rate for 90 days and retain the remaining 10%. China will mirror that decision with a matching suspension and retention.
After more than 40 days of tense back-and-forth, China stood firm, using timely countermeasures to defend its interests and uphold a sense of global fairness. The strategy seemingly worked, pushing the US back to the negotiating table and bringing a temporary halt to its sweeping tariff campaign.
Market reaction was swift and unexpectedly upbeat. Analysts at JPMorgan Chase, Mizuho Bank, and Deutsche Bank all issued positive statements when news broke. US markets rallied, with the Dow Jones, the Nasdaq, and the S&P 500 marking their largest single-day jump since April 9.
The agreement gave companies on both sides some short-term relief and injected a dose of optimism into the global trading system. But few mistook it for a final resolution. Instead, it signaled that companies must now adapt to a shifting international trade landscape, and perhaps build a new consensus on what globalization means in the years ahead.
Whether upcoming negotiations can hammer out lasting details remains uncertain. And with Donald Trump’s policy shifts often abrupt, and new trade deals with other countries still on the table, the tariff pause feels like just that—a pause. The world as it was, is not coming back.
Stormy month for foreign trade
Chen first noticed business getting harder in the second half of 2024. “Orders were already shrinking, and then Trump got reelected. I figured there’d be tension, but no one expected a full-on bombshell. We weren’t ready.”
That bombshell landed on April 2, when the US announced its “reciprocal tariff” policy. Yiwu’s foreign trade community was stunned. “City leaders came to visit the very next day to reassure us,” recalled Deng Yu, who works at Yiwu International Trade City. “If the leadership shows up in person, you know it’s serious.”
On April 9, the tariffs officially took effect. The next day, all of Chen’s US orders were canceled. “Even my clients couldn’t understand Trump’s decision. They didn’t dare adjust prices overnight and couldn’t absorb such high duties.”
Chen spent the next month trapped in a spiral of anxiety, constantly renegotiating with clients who were equally desperate. Some asked him to shoulder part of the losses; others wanted to split the cost of the new tariffs. “They were scared of losing their own market share and wanted to at least ship out the essential goods.”
Based on 2024 data from the China Customs, textiles topped all industries in terms of export exposure to the US, accounting for 32.2% of all textile goods sold abroad. Chen, who specializes in large-scale apparel exports, found himself in one of the hardest-hit sectors.
Another major casualty: wigs and facial hair products. More than 80% of the world’s wigs come from China, and in 2024, 62.02% of them were shipped to the US.
The heart of that industry is Xuchang, Henan. “It hit us hard,” said Wang Min, who works at a wig manufacturer there. Her company shut down for a week in April. “Traditional trade orders vanished almost overnight, and they account for 60% of the market.” Most businesses in the area tried to stabilize morale by scaling back production hours or alternating shifts to keep employees on payroll.
Though consumer electronics such as smartphones, lithium batteries, and tablets also have substantial export volume to the US, their higher technical value gives them better pricing power and resilience against tariffs.
By contrast, midrange consumer electronics, particularly artificial intelligence hardware that relies heavily on the US market, have fared poorly. Industry insiders estimate that for every 50% tariff increase, AI hardware companies lose 10% in net margins. If retail prices stay flat, anything over 100% in tariffs would drive these businesses into losses. Several investment firms have already pulled back on related deals pending further clarity.
Breathing room
Huo Jianguo, former head of the Chinese Academy of International Trade and Economic Cooperation (CAITEC), had predicted that without real progress in negotiations, the reciprocal tariff policy could last three to five months. Whether Trump might change course, he said, would depend largely on US economic conditions.
Tariffs may reduce Chinese imports into the US, but they also risk stoking inflation and triggering retaliation against US exports, especially in sectors like agriculture, energy, and aviation.
Then, just as the business community was bracing for a drawn-out fight, Washington softened its stance far sooner than expected.
As recently as early May, there was little indication of diplomatic progress. On May 2, the US revoked the T86 exemption, which had allowed small parcels under USD 800 to enter duty-free. Just days later, on May 8, China’s Ministry of Commerce stated publicly that while it remains open to dialogue, no agreement would be possible if negotiations are undermined by contradictory actions or demands that compromise core principles.
That’s what made the May 12 joint statement such a welcome surprise for traders like Chen.
On the same day, Trump revised a related executive order: reducing ad valorem tariffs on small parcels under USD 800 from 120% to 54%, while maintaining a USD 100 flat tariff per item. He also withdrew a planned hike that would have doubled the per-item tariff to USD 200 starting June 1, instead enforcing the USD 100 rate starting May 2.
That cut clearing costs significantly, and wig makers like Wang Min are already seeing results. Many Xuchang-based factories have resumed orders for the US. “The hot season from May to July is usually a slow period, so inventory should clear up by then,” she said. “New orders will trickle in again. Still, the damage is done. Our company will lose around 30% of its annual sales.”
Looking on the bright side, Chen told himself that “this is probably the best we could’ve hoped for.”
A new playbook
To Chen, the past month felt like a dramatic breakup and reconciliation. “Like a couple who divorced and got back together—only the trust’s not really there anymore.” Even without the tariff shock, he added, “those golden years of easy exports were over anyway. It’s just not going back to how it was.”
In the early 1990s, with the fall of the Soviet Union, the world entered what’s now seen as the first era of globalization, which was built around a US-centric trade and financial system. Today’s ballooning US trade deficits are the logical end of that order.
Since Trump’s first election in 2017, the world has shifted toward “deglobalization” or, more precisely, a new kind of globalization built on more regional, multipolar relationships.
“It’s the worst of times and the best of times,” Chen mused. His initial fear and frustration have mellowed into a cautious optimism. Going global no longer means simply finding a new export market. For modern Chinese companies, it means being “born global,” designing supply chains and market strategies that can span continents and flex with disruption.
But old habits die hard. For companies used to the comfort of the US market, pivoting isn’t easy.
For Chen, moving into new markets feels like another gamble. “Sometimes the safer move is to stay put, even if it means making less. I can always adapt slowly when the time’s right.”
More capable firms, though, are already making moves, especially into Europe. Li Luwei, who runs a standalone site selling outdoor furniture in France, said she has noticed an influx of former US-focused sellers. “The a’re undercutting everyone. I’m trying to figure out how to respond.”
E-commerce platforms have caught on, too. Since last year, many have been funneling more traffic to merchants using local warehouses or hybrid fulfillment models. According to Sensor Tower, in April 2025, Shein’s ad spending in France and the UK jumped 35% month-on-month, while Temu’s rose by 40% and 20%, respectively.
Su Jian, one of Temu’s early top sellers, revealed that North America now accounts for just 20% of Temu’s overall sales. Shein is also reducing its US dependency. “The smart move is to follow the platform. Sell wherever there’s demand.”
Even overlooked markets are being rediscovered. Over the past month, Zha Jiulan, founder of B2B platform Egatee, has fielded a growing number of inquiries. “Lots of sellers who aren’t competitive in mature markets are now asking how to get started in Africa.”
Whether firms stay loyal to the US market or leap toward new frontiers, one thing is clear: the path ahead remains foggy and fraught. “For us in foreign trade,” said Chen, “if we’re not going global, what else is there?”
Grassroots entrepreneurship is in the DNA of China’s exporters. These founders may come from every corner of the country, but they share a common spirit: bold, resilient, and adaptive. As industry after industry goes through its own transformation, this generation of entrepreneurs continues to chart new paths, whether through tech, branding, or simply sheer persistence.
China’s economic resilience will be tested again and again. But if history is any guide, its exporters will weather the storm and emerge not just intact, but global.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Yang Yuexin for 36Kr.