Small garment manufacturers in Guangzhou face difficult choices as increased tariffs and new tax on cheap imports from the Trump administration force them to abandon U.S. markets, highlighting growing economic separation between the world’s two largest economies despite China’s recent export-driven manufacturing boom.

Chinese garment factories that once thrived selling affordable clothing to American consumers through online platforms like Amazon, Shein, and Temu are facing a critical turning point following President Trump’s implementation of higher tariffs and a new tax on cheap imports. Factory owners in Guangzhou, long the epicenter of China’s competitive garment industry, report that profits have plummeted, with many businesses halting U.S. sales entirely as the economic relationship between the world’s two largest economies continues to deteriorate.

Liu Miao, who owns a small factory in Guangzhou and previously sold clothing to U.S. wholesale buyers through Amazon, exemplifies the industry’s struggles. “You can’t sell anything to the United States right now,” Liu explained. “The tariffs are too high.” His profit margins have dropped from approximately $1 per garment to just 50 cents, making the U.S. market essentially unviable while maintaining current worker wages. The situation stems largely from the elimination of a critical tax loophole that previously allowed packages valued under $800 to enter the United States tax-free, enabling Chinese manufacturers to offer exceptionally low prices to American consumers.

The impact is particularly significant because exports have been a major driver of China’s recent economic growth, with e-commerce showing especially strong performance. The contrast between workers earning roughly $60 daily and the luxury vehicles—Mercedes-Benzes, BMWs, and Cadillacs—parked outside Guangzhou factories highlights how lucrative the export business had become. Now, as trade tensions escalate and new barriers arise, these businesses face difficult decisions: seek alternative markets, relocate to lower-cost regions within China, or move operations to countries not subject to the same tariff structures, potentially accelerating the decoupling of the U.S. and Chinese economies.

(CP) HONG KONG, CHINA – Reported by Mei Lin Zhang.