Since the outbreak of the Sino-US trade war in 2018, the tariff barriers, technological blockades and supply chain reconstructions between the two countries have profoundly changed the global trade pattern. In this major power game, small and medium-sized enterprises with relatively weak risk resistance capabilities bear the brunt. Under the heavy pressure of tariffs, the cost crisis has been brought about by the four rounds of additional tariffs imposed by the United States on China, covering approximately 550 billion US dollars worth of goods. Among them, the tariff rates for industries with a high concentration of small and medium-sized enterprises, such as textiles and garments, furniture, and electronic components, generally reached 25%. Take the small commodity cluster in Yiwu, Zhejiang Province as an example. The tariff on Christmas decorations exported to the United States has soared from 3% to 25%, forcing 30% of local small and micro foreign trade enterprises to abandon the US market. Small and medium-sized enterprises usually cannot absorb costs through economies of scale or supply chain transfer as large enterprises do. A Bluetooth headset factory in Guangdong with an annual export volume of 5 million US dollars saw its net profit margin drop from 8% to -2% due to a 25% tariff. It had to raise prices by 15% to break even, but American customers immediately turned to Vietnamese suppliers. Although the United States allows enterprises to apply for tariff exclusion, as of 2023, only 6% of small and medium-sized enterprises have successfully applied. Cumbersome document processes and legal consultation costs (deter small businesses with limited resources). American buyers force suppliers to diversify production capacity, but small and medium-sized enterprises often lack the ability to set up factories overseas. An American customer of an auto parts factory in Jiangsu Province demanded that it set up a backup factory in Mexico, otherwise the annual order worth 2 million US dollars would be cancelled. However, the annual profit of this factory is only 500,000 US dollars. The technological ban imposed by the United States on enterprises such as Huawei has affected small and medium-sized enterprises in the upstream and downstream. A radio frequency device manufacturer in Shenzhen was forced to suspend production and renovate its production line due to its inability to import US chips. The transformation period lasted for 18 months, during which 80% of its customers were lost. Shipping prices between China and the United States have soared fivefold, and the exchange rate of the US dollar has fluctuated sharply (the annual fluctuation of the RMB against the US dollar exceeds 6%), further eroding the already fragile capital chains of small and medium-sized enterprises. How can small and medium-sized enterprises break through?
From “All in the United States” to the global web weaving, China’s share of exports to ASEAN rose to 15.8% in 2023 (up 4.2% from 2018), while exports to the United States dropped to 16.2% during the same period. Many enterprises have successfully entered the international high-end product line by independently researching and developing new products, investing more than 10% of their annual revenue, increasing the unit price by 30%. Some home furnishing enterprises have signed up with well-known foreign designers, and the prices of their original products on e-commerce platforms are three times higher than those of OEM products. The cluster supply chain where small and medium-sized enterprises gather has attracted many orders from small and medium-sized e-commerce platforms by upgrading equipment, reducing the minimum order quantity, improving efficiency and shortening the delivery date.
Many consumer electronics brands in Shenzhen reach American consumers directly through Amazon and independent websites, with gross profit margins far exceeding those of the OEM model.
The policy of “immediate reporting and immediate refund” for tax reduction and exemption and export tax rebates shortens the cycle of enterprises’ capital occupation.
China Export & Credit Insurance Corporation (Sinosure) offers up to 90% coverage for small and medium-sized enterprises’ orders to the United States, with rates as low as 0.2%, etc., promoting the upgrade of small and medium-sized enterprises from “Made in China” to “Intelligently Made in China”.
In the long-term game of opportunity amid crisis, technological decoupling has forced innovation. The blockade of semiconductor equipment by the United States has prompted small and medium-sized enterprises in the Yangtze River Delta to turn to domestic alternative chips. The cost of chips jointly developed by Chinese manufacturers has been reduced by 40%.
Cross-border e-commerce redefines channels. Platforms such as TikTok Shop and SHEIN enable small and medium-sized enterprises to bypass traditional importers and directly reach the lower-tier markets in the United States for products such as stainless steel jewelry and storage boxes.
For small and medium-sized enterprises, the trade war between China and the United States is both a life-and-death stress test and a forced driver for transformation and upgrading. Those enterprises that have successfully upgraded “Made in China” to “Intelligently Made in China” and shifted from price competition to value creation are forging new global survival capabilities amid the crisis. When “de-risk” becomes the new normal of the global supply chain, the resilience of small and medium-sized enterprises will no longer depend on scale, but on agility, innovation and the depth of ecological collaboration.
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