Since April 2, U.S. President Donald Trump has caused rapid and dramatic shifts in the tariff landscape, creating significant obstacles for China-U.S. trade, particularly for industries reliant on foreign markets like the manufacturing sector.
Desay Group, a Wenzhou-based footwear company with over 30 years in OEM exports, has been directly affected. Founded in 1993, Desay produces 8 million pairs of leather shoes annually, with over 30% of orders coming from the U.S.
Guancha spoke with Zhang Wenjie, General Manager of Desay Group, about the survival strategies of foreign trade companies in this turbulent time and how “Made in China” is adapting to the changing global landscape.
Since Trump began raising tariffs on Chinese exports to the U.S. on April 2, some products now face tariffs as high as 245%. With U.S. exports making up 32% of Desay’s production, how have these tariff changes impacted your production in the past 10 days?
When tariffs were at 10%, we and our U.S. clients were still negotiating ways to manage the impact together. But when they rose to 34%, the already slim margins in footwear and apparel manufacturing made it difficult to move forward. After Trump announced the new policy, most U.S. orders were suspended—it no longer made sense to continue at those rates.
The sudden loss of over 30% in order volume significantly affected our operations, especially staffing. We quickly adjusted by reallocating our U.S. line staff, including foreign trade sales and development teams, to focus on other markets. We also considered modifying work hours from 8 to 6 hours per day due to the reduced workload.
At the same time, we ramped up efforts to grow in other regions—Europe, Australia, Southeast Asia, Japan, and South Korea—supported by branches in Russia and Dubai. Recently, we secured a $20 million order from a reputable brand in Portugal.
Despite setbacks in the U.S. market, we’re seeing steady growth elsewhere. While the tariff policy created short-term challenges, we’re confident that through market diversification, we can absorb the impact and maintain stable growth—even without the U.S. market.
Domestically, we’re also strengthening our own brand to boost local sales.
It’s worth noting that our local government in Wenzhou responded quickly. On the day the 34% tariff was announced, they convened a meeting with major exporters to discuss solutions. One idea was leveraging Wenzhou’s global network—many locals operate overseas businesses—to help redistribute orders and minimize losses collaboratively.
I read that a U.S. customer offered a 30% price increase to share the tariff burden, but you chose to suspend the cooperation. What was the reasoning behind that decision?
The main issue is the instability of the situation. Beyond the 30% price increase, the U.S. also asked us to explore re-exporting through other countries. However, Trump’s exemption for regions like Southeast Asia only lasts 90 days—exactly the lead time we need from order to factory delivery. So even if we tried to implement re-export strategies, they wouldn’t provide a timely solution.
We proposed several alternatives, but after thorough discussion, none proved truly feasible under current conditions. Still, this shows U.S. customers are eager to find solutions—they’re just facing real limitations.
For us in manufacturing, production halts and workforce idle time do lead to losses, but we can endure it. U.S. clients, however, run brand businesses with physical store layouts. If their shelves are empty or filled with lower-quality goods, the damage to their brand reputation is substantial. So in many cases, they’re even more anxious than we are.
With your products sold on platforms like TikTok, Amazon, and eBay, the duty-free exemption for small parcels to the U.S. will end on May 2. Have you taken any urgent measures before then? What strategies will you use to reduce costs if high tariffs persist long-term?
Different product lines have varying tariffs, but whether it’s 145% or 245%, such high tariffs make cross-border e-commerce in the U.S. market, including platforms like Amazon, increasingly difficult to operate.
For small parcel shipments, direct self-shipment from China can work when volumes are low. However, for larger shipments, goods must be stored in overseas warehouses. If shipped through general trade to these warehouses, they won’t qualify for tariff exemptions.
Many Zhejiang light industrial companies moved factories to Southeast Asia due to the trade war during Trump’s first term. If U.S. tariffs on China stay high long-term, would you consider relocating production to Southeast Asia?
While high tariffs may drive some manufacturing industries in China to relocate, it’s not an urgent move for most companies. I’ve seen many businesses shift to places like Vietnam and Myanmar, but the success rate is only about 30%. With the current trade tensions, the likelihood of success is even lower. Moving factories overseas raises short-term costs and risks, and long-term stability depends on the policies of other countries—if they increase taxes, manufacturing could return to China.
From a product perspective, Chinese manufacturing holds an irreplaceable position globally. For instance, we provided OEM services for a well-known British brand that previously produced in India. After facing quality issues and inventory problems, they switched back to us. Similarly, some European clients who produced in Vietnam, where costs are 20% higher and quality isn’t on par with China, have also returned to us. These examples show that “Made in China” remains hard to replace.
You mentioned export-to-domestic sales, a strategy our country is promoting. Can you use Desay as an example to explain how to ‘switch’ and ‘sell’? What technical challenges might arise in this process?
This morning, we discussed an order for tens of thousands of shoes for the U.S. market. While the materials are ready, the shoes haven’t been made yet, and with the increased tariffs, we can’t export them. Now, we need to find a way to pivot these products to domestic sales. The challenge is that U.S. and Chinese foot shapes differ, so we need to adapt the raw materials to create products suited for the domestic market. Shifting semi-finished products to domestic sales is easier, but finished products are trickier, especially when it comes to size differences between U.S. and Chinese shoe sizes.
Since each market has unique preferences, cultures, and foot shapes, we must ensure our products align with Chinese characteristics to better meet domestic needs.
Additionally, foreign trade OEM and direct brand sales are two distinct business models. While both involve shoes, the talent, mindset, and operations differ. Production companies focus more on production and warehouse management, while e-commerce companies prioritize operations, branding, and marketing. These require separate teams and operational systems.
Shifting from export to domestic sales is almost like starting a new venture. Though we have some foundation, like product inventory, it requires in-depth planning for how to transition products and develop the domestic market.
Platforms like JD.com offer support through “export to domestic sales” zones, stores, and labels, which help increase visibility. Recently, during my live broadcast, many viewers expressed support for “Made in China” and said they’d shop at the “export to domestic sales” stores to show their support.
With more companies shifting to domestic sales, market supply will increase, but the footwear market has seen limited growth in recent years. Are you concerned about a price war? What measures are you taking to manage this risk?
The domestic supply chain has been volatile, and the situation is even more intense now. For many companies, it’s no longer about profit, but survival. This creates a high risk of price wars. To mitigate this, platforms need to enforce healthy competition, and merchants must make independent decisions.
For us, after facing challenges like the trade wars and the pandemic, we’ve refined our development strategy. Relying solely on foreign trade exposes companies to greater risk, so we’ve focused on building our brand and diversifying channels.
We won’t engage in price wars or offer products at a loss, as that’s not a sustainable approach. Instead, we focus on creating unique products to build our brand. Despite the challenges facing China’s manufacturing, this will ultimately accelerate the growth of Chinese brands. We’re seeing a shift in the global market from “Made in China” to “China’s alternative,” and eventually to “China’s brands.”
Source: Guancha, Xinhua, Sina
