Tinker, tailor, robot maker: In China, trade war threat casts long shadow

The robots are on a sprawling list of products threatened with steep US tariffs amid a simmering trade stand-off

SHENZHEN/SHANGHAI: At its high-tech laboratories in the Chinese manufacturing hub of Shenzhen, Beike Biotechnology is developing medical robots that could help treat cancer. It has big plans to export these to markets like the United States.

Those plans are now under threat. The robots, which help develop cell cultures used in stem cell therapies, are on a sprawling list of products threatened with steep US tariffs amid a simmering trade stand-off between Washington and Beijing.

The company is already factoring US tariffs into its plans and order pipeline for next year and has tasked its sales teams with finding new markets to make up an expected shortfall from the United States.



Beike, a domestic leader in stem cell technology with government support and long-standing ties overseas, illustrates the stakes for China after Washington and Beijing kicked off trade talks on Thursday and ended Friday.

Led by US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, the talks were aimed at defusing tensions between the world’s top two economies and avert a full-blown trade war that could rattle companies in the United States and China.

Officials from both countries reached a consensus on some aspects of the trade dispute, but disagreements over other issues remain “relatively big”, China’s Xinhua news agency said.

The talks were held amid signs that trade frictions are growing. China’s major ports of entry have increased checks on fresh fruit imports from the United States, five Chinese industry sources told Reuters.

In the meantime, manufacturers are watching developments nervously.

“The trade sanctions between China and the US will certainly have a huge impact on us,” Hu Xiang, Beike’s founder, and chairman said at the firm’s Shenzhen headquarters.

“We are developing a completely automated cell culture robot, which comes within the scope of the tariffs,” he said. He added that the company had received significant purchase intent orders from US buyers that could be hit hard.

The machines have various robotic parts which move the cell cultures and keep them in a controlled environment as they grow.

The United States is threatening to slap tariffs of 25 per cent on over 1,300 Chinese products, including medical devices, robots and sewing machines, valued at around $50 billion. That follows levies on aluminum and steel.

The US tariffs could go into effect in June following the completion of a 60-day consultation period. China has threatened retaliation in equal measure, including tariffs on major US exports like soybeans and aircraft.

EXPANSION PLANS

Beike is not alone. Interviews around China with business leaders in medical devices, apparel, manufacturing, steel products, printing and others underscore how broadly the trade war threat is being felt.

Some are already seeing tangible impacts and are shifting sales elsewhere or scrapping factory expansion plans as US orders drop. Others are grappling with the uncertain outlook the trade war threat brings.

China’s state media said on Friday that reaching a deal to avert a trade war would not be easy and “failure would herald a slugfest of tariffs that would leave global trade reeling”.

Other companies that could be hit include the likes of Hebei Huayang Steel Pipe, a manufacturer in the city of Cangzhou in eastern Hebei province that has seen US orders dry up over the last few months as trade tensions have risen.

The firm makes metal pipes used for transporting things like oil, gas or water which it said normally take three months to produce and ship to clients.

US buyers were worried about paying extra tariffs if the policy came into effect, Steven Yue, a sales manager at the Hebei-based firm, said at the company’s manufacturing facility.

“We were planning to expand in the United States this year,” he said. Yue added that the company would now look to adjust its plans for the US market in the expectation that a new tariff policy would come into effect.

Yue said US buyers would still need to buy the products from somewhere, and there would likely be more trans-shipments, whereby products avoid tariffs by being sold to middlemen in a third country before being shipped to the United States.

In the southern city of Dongguan, another firm, Wagon International, is seeing a weaker performance from US sales of its metal accessories for luxury brands and its soccer merchandise that it makes as an authorized partner of FIFA - although it’s not all trade related.

“Because they didn’t get into the World Cup, sales forecasts there are about 60-70 per cent lower than what we had estimated,” Perry Chou, Wagon’s vice president told Reuters, referring to the United States. He added that trade frictions would, however, hit others areas of the firm’s business.

“GOING TO WAR”

In the port city of Ningbo, Joan Lu is anxious about rising pressures on the price of the fabric printers her company sells - 40 per cent of which go to the US market - as clients look for discounts to offset higher import levies.

“The whole industry is worried,” Lu said. “Future orders from clients will certainly come under pricing pressure, that’s for sure.” Lu added: “It’s not just a little extra - it’s 25 per cent. If we’re talking a $10,000 deal then you’d be adding $2,500.”

Lu said her company would not abandon the US market, “but we are putting all our energy into developing other markets”.

The United States is China’s largest trading partner with $506 billion worth of US imports from the country last year, according to US trade data. A large trade surplus with the United States is partly behind recent tensions.



In Yiwu - a sprawling city known for exporting huge volumes of gadgets, toys and Christmas decorations - merchants were more circumspect about the impact but were keeping close tabs on developments.

“We’ve been following the news on our phones,” said Yang Dingju, a manager at Zhejiang Bote Sewing Machine, as he peeled an orange inside his store in a cavernous trading hall.

He added, however, that most of his buyers were in less developed markets like the Middle East and Africa, which would dull any impact.

Chen Haiying, who worked for another Yiwu firm selling sewing scissors and sewing machine parts, was at a loss as to why sewing machines were on the US list but said a full-blown trade war would have a wider ripple effect.

“If we really go to war with the United States then it will affect everyone,” he said.