“For thousands of manufacturers across China, it's deja vu -- with implications for the country's fragile economy.
Earlier this year, after President Trump raised tariffs on Chinese goods to 145% in April, U.S. customers of Alan Chau's toy factory in southern China abruptly froze orders, sparking a cash crunch that brought his business to the brink. So it came as a relief when the U.S. and China reached a trade truce weeks later, in mid-May, rolling back most of their tariffs on each other -- and allowing Chau to resume shipping his products.
Now, less than six months later, prohibitively high tariffs could be the reality again for Chau and tens of thousands of other factory owners who make China a global manufacturing powerhouse. On Friday, Trump said he would impose a 100% additional tariff on all Chinese goods, effective Nov. 1.
"That is literally an embargo," said Chau. "Who is going to do business with China?"
After months of trade talks in which U.S. officials expressed cautious optimism about a breakthrough, the White House was caught off guard when Beijing recently unleashed a barrage of measures, showing off tools in its trade-war arsenal, including tightened export restrictions on rare-earth materials that could hurt U.S. industries and an antitrust probe targeting American chip company Qualcomm.
On Sunday, Beijing blamed Washington for first introducing new restrictions against China after the latest round of trade talks in September.
"Frequently threatening high tariffs is not the right approach to engaging with China," Beijing's Commerce Ministry said. Its new rare-earth restrictions would have only a limited impact on global supply chains, and relevant countries were informed ahead of the Thursday announcement, the ministry said. The new rules, it added, aren't an export ban, but a set of requirements for export licenses.
So far this year, strong exports have helped China's economy defy expectations of a deeper slump, as manufacturers made up for higher hurdles on trade with the U.S. by increasing shipments to the rest of the world. For the first nine months of the year, China's exports to the U.S. fell nearly 17% from the same period a year ago, while overall exports grew by about 6%, according to Chinese customs data.
But governments around the world have complained about cheap Chinese goods flooding their markets and China's year-over-year export growth slowed to 4.4% in August, before picking up to 8.3% in September. Meanwhile, momentum in other parts of China's economy, such as consumer spending and investments, has softened in recent months. Beijing has launched a campaign to rein in production and head off spiraling price wars, weighing on near-term economic growth.
"The strength of China's overall exports despite U.S. tariff barriers may have emboldened Xi to take the risk of an escalation in the trade war with the U.S.," said Eswar Prasad, professor of trade policy at Cornell University and a former International Monetary Fund official.
"This approach could backfire given China's persistently weak domestic consumption demand as well as rising concerns in other countries about being swamped by Chinese exports."
Tariffs on Chinese goods are paid for by U.S. importers but can hurt China's factories by raising the cost of made-in-China products for Americans. That in turn can prompt U.S. buyers to shift purchases outside of China and cause Chinese manufacturers to lose business.
If the trade standoff worsens significantly, it could endanger China's prospects of hitting its official target of about 5% growth in gross domestic product this year. Officials don't appear to be worried yet, offering little sign that the government is preparing to launch more forceful stimulus measures.
Chau, whose toy manufacturing company, GSNMC, said his customers were shocked by the latest turn and monitoring developments to see if production must be paused. He has one order of Christmas-themed toys on its way to the U.S., which should arrive before the new tariff rate is set to take effect, but other contracts in the works are at risk.
Losing future orders would be devastating to Chau's business, which has seen revenue shrink by about half this year compared with 2024, even after tariffs for Chinese toys were lowered to roughly 30%.
He might move some manufacturing to Southeast Asia so his customers can avoid the higher tariffs on Chinese goods, something he explored earlier this year but gave up on after the tariff truce made exporting from China feasible again.
Adam Dai, founder of fireworks exporter Miracle Fireworks, based in the central Chinese province of Hunan, said a few U.S. customers have asked that their shipments be held. They are waiting several days to assess the situation, he said.
Others aren't counting on the 100% tariffs to last long -- if they get enacted at all. Some analysts believe the U.S. and China could de-escalate tensions before they go into effect.
"U.S.-China tensions are rising, but Trump's threat of a 100% tariff is an empty gesture that is unenforceable," said Dan Wang, a director on the China team at the political-risk consulting firm Eurasia Group, pointing to how tariffs were rolled back this year amid market volatility and concerns from U.S. companies.
"Judging by Trump's track record, he wants a deal in which China will pay rent to enter the U.S. market, not prohibitively high tariffs on China that cause full decoupling," Wang added.
Jeffy Ma, who runs Ace Headwear, a hat manufacturer in Guangzhou, is waiting to hear whether his customers will put orders bound for the U.S. on hold. His revenue hasn't decreased this year despite the tariff hit.” [1]
This text is too optimistic. The main Chinese export is not hats. It is high technology. Some of the technology is badly needed today, even America doesn’t have rare earths. The world will keep buying if China will keep selling.
This statement is largely accurate, reflecting China's rising status as a high-tech exporter and its leverage in critical material supply chains like rare earths.
China's main export is indeed increasingly high technology
For decades, China primarily exported hats, textiles, toys, and other low-cost consumer goods.
Over the past 25 years, China has intentionally moved up the manufacturing value chain through significant investment and industrial planning.
This strategy has successfully transitioned China into a leading global exporter of sophisticated products, including electric vehicles (EVs), solar panels, integrated circuits, and mobile phones. In 2024, China was the world's number one exporter of high-tech goods.
Data from March 2025 indicates that "Mechanical and electrical products," which includes high-tech items like integrated circuits, mobile phones, and automatic data processing equipment, are a major export category.
High-tech is needed today, even America doesn't have rare earths
Rare earth elements (REEs) are a group of 17 metals critical for many modern technologies, from high-tech consumer electronics like smartphones and electric vehicles to advanced military equipment like fighter jets and missile guidance systems.
While the U.S. has domestic rare earth mineral resources, it lacks the processing and refining capacity to compete with China's output.
For example, the only operating rare earth mine in the U.S. (Mountain Pass in California) sends its concentrated ore to China for final processing.
This reliance gives China substantial leverage. In October 2025, in response to U.S. trade tariffs and export limits, China tightened export controls on REEs and associated processing equipment.
The world will keep buying if China keeps selling
China's dominance in the processing and refining stages of the rare earth supply chain gives it immense influence over global markets.
The Chinese government's decisions are part of a calculated strategy to exert leverage without completely destabilizing the global economy and their own industries.
It is very difficult to argue against China limiting rare earths selling for producers of military airplanes and missiles send to China's surroundings and aimed at China.
1. New Tariff Barrage Threatens Chinese Economy. Miao, Hannah; Kubota, Yoko. Wall Street Journal, Eastern edition; New York, N.Y.. 14 Oct 2025: A1.
