China’s export-driven economy, long a global powerhouse, is grappling with severe strain as the US-China trade war intensifies under President Donald Trump’s aggressive tariff policies. By June 2025, Beijing’s manufacturing hubs, particularly in Guangzhou and Yiwu, face dwindling orders, factory closures, and a pivot to alternative markets, as US tariffs soaring to 145% cripple demand for Chinese goods.
The retaliatory 125% tariffs imposed by China on US imports, coupled with export restrictions on critical minerals like rare earths, have disrupted global supply chains, exacerbating economic pressures on Chinese producers. This escalating economic conflict, rooted in accusations of unfair trade practices and national security concerns, threatens to reshape global commerce, with profound implications for China’s industrial heartland.
The trade war, reignited in April 2025, has hit China’s eastern seaboard hardest, where export-oriented factories producing electronics, toys, and textiles report a 30% drop in US orders. In Guangzhou, dubbed the “factory of the world,” manufacturers like Bin Zhang of Guangzhou Ifun Park Technology, which makes arcade games, are slashing production and laying off workers, hoping for a tariff rollback.
Beijing’s restrictions on rare earths, essential for semiconductors and jet engines, have backfired, prompting US companies to seek supplies elsewhere, further squeezing Chinese exporters. China’s Commerce Ministry, signaling a willingness for talks in May, insisted on US tariff cancellations as a precondition, but Trump’s refusal to back down has deepened the impasse. Chinese firms are exploring markets in Mexico, Canada, and South America, but these cannot fully offset the loss of the $600 billion US market.
The trade war’s toll is evident in Yiwu’s trade market, where vendors like Jiang Jiayu, who exports party supplies, resort to social commerce platforms to clear unsold inventory at bargain prices. As factories declare “holidays” to cut costs, China’s leadership faces mounting pressure to balance economic stability with nationalist defiance, amid fears of a prolonged global economic slowdown.