Interview 30 individuals who experienced the tariff war: Make the best preparations and be prepared for the worst.

Text by | Ren Qian, Shi Jiaxiang

Edited by | Chen Zhiyan

After 12 days of confrontation, only China and the United States remain at the two ends of the poker table.

The intention of the United States in this tariff war is obvious. It aims to reshuffle the global supply chain through tariff differences and exclude China from the key links. While promoting the return of its domestic manufacturing industry, it also initiates a global "choosing sides" game.

However, the supply - chain migration of multinational enterprises is not a simple either - or choice. In essence, it is a complex and systematic project. For the current US market, policy suppression cannot directly lead to the return of the manufacturing industry in the short term.

"No country can instantly replace China's position in the global supply chain." An investor who has long been concerned about overseas expansion told "Undercurrent Waves".

The development of events quickly proved this point. As of now, the latest news is that the US Customs and Border Protection (CBP) issued an updated guide on reciprocal tariff exemptions on the evening of the 11th Eastern Time, announcing tariff exemptions for 20 items such as consumer electronics, servers, and semiconductor devices. This exemption only covers a small number of goods, mainly targeting Apple's supply chain and NVIDIA's AI servers.

However, this is not a sign of safety. For Chinese enterprises that are just starting to go global, the challenges have just begun.

Ray Dalio, the founder of Bridgewater Associates, believes that the greater impact behind the tariff war is actually the complete collapse of the global monetary system, political order, and geopolitical pattern. "This is far more important than tariffs and is a once - in - a - lifetime event."

Under the system collapse, Chinese overseas - going enterprises will face at least the following problems:

Should they abandon the US market? Or should they build factories in the United States to seek certainty?

Among the Southeast Asian, Latin American, and European markets, where is the most suitable place for different industries?

From the previous export trade to today's cross - border e - commerce, what new roles will Chinese sellers play in international trade in the future? Or will they be completely out of the game?

More fundamentally, is it still possible to recreate multinational enterprises to obtain global dividends today?

In the past week, "Undercurrent Waves" interviewed more than 30 people on the front line of the tariff war. Some of them are practitioners in the cross - border e - commerce chain, some work in the front line of manufacturing industries such as automobiles and new energy, some have been fully committed to overseas investment in the past seven or eight years, and there are also professors and lawyers who are deeply involved in tariff policy research and practice. They have all been working in their respective fields for more than 10 years, live in the United States, and have experienced at least one cycle change.

Although each person has their own optimism and pessimism about different issues, they at least have one consensus: For a long time, there will be no clear end to the tariff war and the entire China - US game. The game between major powers will gradually evolve through fragmentation, phased and specific - field compromises.

Therefore, since the journey of Chinese enterprises going global will not stop due to the shocks of the external environment, establishing a bottom - line thinking under the new context of globalization is at least the most appropriate and feasible thing at present. The situation may improve, but always be prepared for the worst.

Part 01 Solving the Cross - border E - commerce Puzzle

Price Increase or Tough Resistance?

For enterprises with strong brand premiums and market pricing power, the answer is to increase prices.

Anker Innovations was the first to take action. It has raised the prices of its products on Amazon by one - fifth. A person who has had contact with Anker Innovations said that so far, its market share in the United States has not decreased. Although Pop Mart has not raised prices immediately, it said that "this possibility cannot be ruled out in the future."

A cross - border industry practitioner believes that enterprises with obvious industrial - chain advantages, such as DJI, will not easily lose their market share to competitors in the short term, even if their costs increase.

"Tariffs are a short - term toll, while products are the long - term pass." Anker Innovations responded to the impact of tariff policies in this way. Wei Zhe, the founding partner and chairman of Joy Capital, believes that if there are no competitors for products and the supply chain outside China, enterprises should have confidence in their irreplaceability.

On the other hand, contract manufacturers have to tough it out for a while.

"Undercurrent Waves" learned that most ODM enterprises targeting the US market are currently in a stalemate and waiting state. They have suspended shipments and are expected not to accept orders for several months. Wei Zhe said that not only his invested enterprises but also their peers are not accepting orders, and importers are not placing orders either.

Wei Zhe believes that there will definitely be a solution between China and the United States in the next two to three months because ODM enterprises must confirm US Christmas orders in July and August. If the situation is still in a quagmire at that time, "the United States will have an empty Christmas."

Will Cross - border E - commerce "Small Parcels" Become History?

The so - called "small parcels" are based on a tariff exemption policy called the "de minimis value" in the US market. That is, any package delivered directly to individual buyers by mail can enter the United States duty - free as long as its value is less than $800. This "small - value exemption" policy is also one of the foundations for the booming development of cross - border e - commerce platforms such as Shein and Temu in the US market.

According to data from the US Customs and Border Protection (CBP), in fiscal year 2024, the total number of small parcels entering the United States through the "small - value exemption" was nearly 1.4 billion, most of which were from China.

However, when Trump announced the latest tariff plan on April 2nd Eastern Time, he also signed an executive order to completely cancel the "small - value exemption." Starting from 00:01 on May 2nd Eastern Time (12:01 noon on May 2nd Beijing Time), the United States terminated the duty - free treatment for small parcels imported from the Chinese mainland and Hong Kong, China. The White House also announced on April 8th that the tariff on small parcels from the Chinese mainland and Hong Kong would be increased from 30% of the goods' value to 90%.

Therefore, small and medium - sized sellers who rely on platforms such as TikTok, Temu, and Shein to conduct cross - border small - parcel business without stocking in overseas warehouses are greatly affected by this tariff.

"Cross - border small commodities are not just half of the territory for Chinese enterprises going global; they may account for three - quarters." A cross - border e - commerce practitioner said that even if there is some leeway in tariffs, "it's just a matter of quantity, not quality."

The operation director of the cross - border e - commerce department of a listed company also told "Undercurrent Waves" bluntly that it is impossible to sell products while maintaining the original selling price and paying 100% tax on the purchase price.

Wei Zhe believes that the cancellation of the small - value exemption and the related business models facing difficulties in the United States are almost certain. "The small - value exemption clause is just a special domestic law in the United States. And it only targets certain Chinese platforms or brand merchants, which won't get support from the world." Therefore, the cross - border small - parcel business needs to be transformed.

However, some interviewees mentioned that currently, more than 90% of the goods shipped to the United States enter the country through "gray clearance." Gray clearance means that exporters hand over their goods to specialized customs - clearance companies to pass through customs at a very low cost. The above - mentioned practitioners believe that the change in tariff policies mainly affects customs - clearance efficiency.

As for whether tariffs will directly eliminate the small - parcel business? "The bigger the waves, the more valuable the fish. There will always be smart people who can get through with gray clearance."

Will Overseas Warehouses Become the Standard for Cross - border Sellers?

It is inevitable, but there are risks.

Its most obvious advantage is that the cost is controllable in front of the platform. Branden, a Southeast Asian cross - border practitioner, gave an example to "Undercurrent Waves". Since the beginning of this year, the comprehensive commissions of Shopee and Lazada in Vietnam have increased by 11%, which is a multiple - level increase compared with a few years ago. In Thailand, the platform commission for cross - border qualified sellers will increase by 4% in April. Before the tariff policy, countries had already been charging an additional 7 - 10% value - added tax on cross - border small parcels. "But if there is stock in overseas warehouses, local delivery will not be affected much."

A former Temu merchant said that Temu has clearly favored the semi - managed model (i.e., equipped with overseas warehouses). "Most of the top - ranked products on the first search page are semi - managed, and those with the Local label will have better traffic."

An employee of a leading overseas - warehouse enterprise told us that before the tariff policy took effect from last year to this year, their overseas warehouses were in short supply, and "they had been rejecting customers." But he also admitted that although the tariff policy will encourage existing merchants to set up more overseas warehouses in the short term, in the long run, fewer people may be willing to engage in cross - border e - commerce, and the overall market will shrink.

There is also a hidden problem. Even if it is transformed into a local e - commerce model, it is still difficult to judge the inventory configuration in the United States in the short term for categories with a large number of SKUs and rapid updates (such as clothing). The resulting business risks still pose challenges.

Should the Supply Chain Leave China?

It is certain.

Today's global supply chain is no longer a linear structure but a highly intertwined systematic project. It is unrealistic to completely bypass China, but partial transfer is possible. The most common answer we got is to move the supply chain to Southeast Asia and Mexico.

Ren Guang, an investor at Joy Capital, suggested before the tariff policy took effect that, first, enterprises should not switch to self - production all at once but gradually, starting with a combination of partial self - production and partial external assistance to find a balance; second, by arranging overseas factories in Southeast Asia and other regions, enterprises should consider the production costs of their own factories from the whole - chain perspective. Wei Zhe mentioned that most of the enterprises invested by Joy Capital started to make adjustments a few years ago, and currently, 20 - 30% of their supply chains are located in Southeast Asia.

In the context of the poor China - US trade environment, a feasible approach is to transport Chinese raw materials or semi - finished products abroad for assembly and packaging in the early stage, and then produce some raw materials locally or outsource in the later stage.

Michael, a cross - border e - commerce practitioner, believes that for labor - intensive industries such as textiles and clothing, the tariff - policy advantages and low - cost advantages of Southeast Asian countries exporting to the United States will gradually replace "Made in China." If it is becoming increasingly difficult for Chinese factories targeting the US market to obtain US orders in the future, then for enterprises that are going global with their brands, it is necessary to locate their supply chains in Southeast Asia, Mexico, or Africa. The reason is simple: Southeast Asia has the advantage of low costs, while Mexico is close to the US market and has preferential policies.

However, building factories overseas poses significant challenges to enterprises in terms of labor, logistics, delivery quality, and cash flow. Michael told "Undercurrent Waves" that generally, a more common and feasible way is to migrate in groups, that is, the upstream and downstream of the industrial chain migrate together. But this will inevitably lead to a significant reduction in domestic jobs, and the service - related businesses around the original factories may also suffer losses due to the overflow of production capacity.

The book "Spillover" once mentioned an example of the gradual transfer of the production capacity of Yue Yuen Shoe Factory in Gaobu Town, Dongguan, to Vietnam. Yue Yuen Shoe Factory is a Taiwan - funded enterprise. At its peak, it employed more than 200,000 people in the Chinese mainland, with about 100,000 in Gaobu Town alone. Since 2008, its production capacity has gradually been transferred overseas, and only about 8,000 people remain in the Gaobu factory. However, only the final shoe - bonding process in the shoe - making industry was transferred to Vietnam, not the entire production process.

"Strengthening cooperation with core suppliers in the upstream of the industrial chain, the part of the supply chain that cannot be migrated is relatively core. Theoretically, their business will be less affected, and they may even have greater business opportunities due to the spillover of the manufacturing industry." Michael said.

Southeast Asia vs. Mexico: How to Choose?

Southeast Asia > Mexico.

Some interviewees who support Mexico believe that as one of the only two countries not subject to further tariff increases in the tariff war, it is sufficient to prove the stability of the US - Mexico - Canada Agreement. But Wei Zhe said that he only advises enterprises to go to Southeast Asia.

"Because many enterprises do not understand the certificate of origin." In the context of the foreseeable continuous strict inspection of the origin by the United States, migrating to Mexico is not safe.

Bu Rui, a partner at Fangda Partners, told "Undercurrent Waves" that the so - called certificate of origin consists of two parts. The first part is to obtain the local C.O. (i.e., Certificate of Origin), and the second part is to meet the requirements of the CBP declaration for the origin when entering the United States. The latter depends on whether the relevant third country has signed a trade reciprocity agreement with the United States and whether it is a country eligible for the generalized system of preferences rules of origin.

In short, it is to prevent tax evasion through entrepot trade or simple component splicing.

Bu Rui said that according to the US - Mexico - Canada Agreement, if a product uses materials not originating from the United States, Canada, and Mexico (for example, raw materials imported from China) during the production and processing process, it is no longer a fully obtained product. Whether the product can obtain the origin qualification needs to be judged by whether a substantial transformation has occurred. If no substantial transformation has occurred, it is necessary to judge whether the regional value - content standard meets the minimum standard (not less than 60% by the transaction - value method / not less than 50% by the cost method).

Yu Ke, the general manager of the global logistics center of Minth Group, judged that the Mexican government will definitely impose additional tariffs on China in the future. Because the United States believes that a large number of Chinese - origin products enter the United States through Mexico and Canada as entrepot trade, the Mexican government will also more strictly regulate and prevent Chinese goods from entering Mexico and then being re - labeled as Mexican - origin products to enter the United States in order to "show loyalty" to the United States.

His observation is that the Mexican government is vigorously promoting the development of the local supply chain by reducing tariff preferences and raising the threshold for import VAT exemption. "This is similar to China's transformation from mainly relying on processing trade to developing the local industrial chain."

This also requires Chinese overseas - going enterprises to plan ahead and transform the supply chain in Mexico to be more local. "We will require local enterprises to declare and issue certificates of origin according to the actual origin and not to forge them."

What Should Temu and Shein Do?

There is almost only one way: "localization."

Affected by the cancellation of the "small - value exemption," TikTok Shop recently issued a notice to US - region sellers, stating that starting from May 2nd, a 30% ad - valorem tax will be levied on imported goods, and a specific tariff of $25 per piece (before June 1st) or $50 per piece (after June 1st) will be added in stages. At the same time, carriers are required to pay an international deposit. As of now, Temu and Shein have not announced their response measures.

Bu Rui predicts that the affected platform - type giants will go fully international, carry out business locally, and distinguish between domestic and foreign supply chains.

Actually, this is indeed the case. A cross - border e - commerce person said that both Temu and Shein are promoting deeper localization in multiple countries and accelerating the recruitment of local merchants. For example, Shein is arranging production capacity in Turkey, Brazil, etc. "After all, in the current situation, regions other than China can be regarded as tariff low - lying areas." Temu plans to open 6 "local - local sites" and 9 "semi - managed sites" from April to June (both local - local and semi - managed sites are for sellers with local delivery capabilities, the former for overseas local main - body companies and the latter for Chinese main - body companies).

Just during the days when the tariff policy was making a stir, Temu signed a memorandum with the DHL Group. The memorandum states that the DHL Group will use its professional logistics