Small factories with tiny profit margins have played a central role in China’s international competitiveness. Many could now face disaster.
As President Trump ratcheted up new tariffs on goods from China to 125 percent this week, the mood in the dusty streets and small factories of southeastern China was a mixture of anger, worry and resolve.
Thousands of export-oriented small factories in or near Guangzhou, the commercial hub of southeastern China, have played a central role in the country’s rapid economic development over the past half century. Quick to supply almost any manufactured product at a low cost, they employ millions of migrant workers from all over China.
Now many of these small factories, cornerstones of the Chinese economy, are confronting difficult times. Clothing factory managers fret about a spate of orders from American customers being canceled at the last minute, saddling them with losses. Managers of factories making machinery wonder whether their low costs will help them survive. And workers hope they will still have jobs in the coming weeks and months.
A few garment factories that mainly supplied the United States market have already closed temporarily as their owners wait for more clarity on tariffs. Managers of many more factories are now hurrying to find buyers in other countries or chase down customers in China.
But China already faced a huge glut of factory capacity even before Mr. Trump began closing the American market this year to many imports from China. Customers elsewhere have demanded ever deeper discounts.