TRADE WAR FALLOUT: Chinese factories slow production as U.S. tariffs bite

04/27/2025 / By Laura Harris

High tariffs (up to 245 percent) on Chinese goods force American buyers to cancel orders, leaving Chinese factories with unsold inventory and slashed production.
Provinces like Zhejiang and Guangdong face mass layoffs, reduced shifts and closures as orders dry up, forcing workers into unpaid or minimal-wage leave.
Workers post videos of idle factories and unsold goods (e.g., apparel, electronics) being liquidated at fractions of their original value, signaling collapsing demand.
The U.S. market ($438.9B in exports) is irreplaceable; weak domestic consumption and low wages hinder Beijing’s “dual circulation” economic strategy.
The U.S. and EU are accelerating domestic production in critical sectors (e.g., semiconductors) to reduce dependence on China’s strained manufacturing base.

Factories across China are scaling back production and furloughing workers as steep U.S. tariffs throttle demand for Chinese goods, from apparel to home appliances.

According to several reports, most exports to the U.S. are now facing duties of at least 25 percent. Manufacturers revealed that American buyers are cancelling orders due to soaring U.S. tariffs, now as high as 245 percent on some Chinese goods.

The ripple effects of this escalating trade war are ravaging export-oriented provinces like Zhejiang, Guangdong and Jiangsu, where warehouses are overflowing with goods originally destined for American consumers.

The factory owners of these industrial hubs have reported production halts, reduced overtime and temporary layoffs. Dongguan Yuanguan Technology, a plastic mould producer, canceled all weekend overtime due to lost orders, while a Fujian-based plastics factory halted production for a week. A Zhejiang toy factory, heavily reliant on U.S. buyers, gave workers an unplanned two-week break.

Moreover, DeHong Electrical Products in Guangdong placed workers on a one-month leave with minimum wages after clients suspended purchases. Guangdong recruiters report increasing cuts to overtime and weekend shifts.

Some firms, like Hangzhou Stellarmed, which makes medical equipment for the U.S. market, advised employees to seek new jobs, offering access to recruitment agencies. “We don’t know how long this will last,” said Shi, the factory owner, who does not want to disclose her full name. “We can only wait and see, there is nothing we can do.”

Workers have also shared videos and images of idle assembly lines and suspension notices on Douyin, the Chinese counterpart of TikTok. The uploaded videos on social media reveal mountains of unsold inventory – yoga pants, footwear, home appliances and even high-end brands like Crocs – being offloaded for pennies. One Zhejiang-based seller lamented that products once worth $100 in the U.S. now sell for literal cents per unit, with little buyer interest.

Employees at factories like Suzhou Lively Home Textiles are being pressured to sell excess blankets via social media, with managers resorting to personal networks to offload stock.

Economic experts: China can’t afford to lose the U.S. market

China’s economy, long propped up by exports, is feeling the strain. Experts warn the country cannot afford to lose the U.S., its top export destination ($438.9 billion in 2024).

“I have worked in the manufacturing industry for more than 10 years and I understand clearly the ratio of China’s population to manufacturing. This economic situation (now) can be said to be unprecedented (and not seen) in decades,” said Chen Xiang, who previously worked as a manager in export factories in Zhejiang, Jiangsu and Guangdong – where many have now issued “holiday notices.” (Related: China’s tragic choice: Run the factories and sacrifice the workers, or halt the factories and lose the nation.)

China’s push for a self-sufficient “dual circulation” economy is facing hurdles as weak consumer demand undermines its pivot toward local consumption. In export-reliant regions like Zhejiang, where overseas sales account for 70 percent of GDP, U.S. tariffs have slashed orders, putting over half of the factories at risk of closure.

This struggle highlights broader challenges in Beijing’s strategy, prompting the U.S. and EU to ramp up domestic manufacturing in critical sectors like semiconductors and PPE to reduce reliance on foreign supply chains.

“China has little domestic demand because the average income of Chinese people accounts for a too low a proportion of GDP, so their consumption capacity is not good. China cannot afford to lose the U.S. market,” said Chen.

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