As U.S. tariffs fluctuate, placing pressure on Chinese exporters, manufacturers in south China's Guangdong Province have shown resilience through diverse strategies and innovation.
Kobe Leather, a Guangzhou-based company, is an example. The company was founded in 2008, with its entire business built on exports. Earlier this year, tariffs almost halted its production.
"When the tariffs reached over 100 percent, our exports essentially came to a halt, and all the goods stayed in the warehouse. The customers couldn't bear these costs, and our factory also couldn't afford the high tariffs," said She Chunhui, Vice President of the company.
This is the second time the company has been hit. The initial tranche of U.S. tariffs under the Trump administration around 2018 reduced its export percentage to 70 percent.
Like many other entrepreneurs in Guangdong, the company began to seek to diversify its business. Turning to the domestic market is a common choice for many manufacturers in Guangdong.
"We used to have a great portion of U.S orders and European orders. When I joined the company, it was almost 80 percent U.S. plus European orders. And then, going into 2018, the trade war (began). So we started to ship our orders to domestic [customers], and in the meantime to raise our own retail brands. The proportion of it, sometimes it would be the other way around, like almost 80 percent of the orders are domestic orders. Almost zero U.S. orders," said Wayne Cai, Vice President of Foshan-based Esquel Group Brands and Retailing.
The transition is not an overnight process and has faced numerous headwinds, but it has proven wise, as the so-called Trump 2.0 tariff is again undermining global trade this year.
The manufacturers in Guangdong are not only diversifying their exports but also investing in research and development, as well as branding.
For Canton Unicorn Group, another high-end leather bag manufacturer in Guangzhou, their strategies include diversifying production, establishing factories in Indonesia and Bangladesh, and, more importantly, diversifying their innovation.
"We have a team of about 17 or 18 designers who focus on making our products more comfortable and better suited to our users' needs, which will help us grow our market share. Our main goal is to keep coming up with new ideas, so our products become an important part of people's daily lives. That's the purpose of our design work," said Zhang Xuanhao, General Manager of the Canton Unicorn Group.
Despite the potential political uncertainty, many Guangdong companies believe they can improve their businesses in the second half of the year, having learned to navigate headwinds through innovation, diversification, and flexibility.
Guangdong manufacturers navigate U.S. tariff blow with diversification, innovation
