Major Blow to U.S. Exports After Reciprocal Tariffs
Yiwu Merchants Respond by Diversifying Export Markets
Dramatic Cases of "Origin Laundering" Emerge
Yiwu City in Zhejiang Province, home to the world's largest Christmas goods market, has had a difficult year due to U.S. tariffs. As President Donald Trump raised tariff rates on Chinese products, exports to the United States have plummeted. Merchants in Yiwu are enduring the situation by switching their export destinations to Europe or by laundering the country of origin to evade tariffs.
As the end of the year approaches, the Christmas section of the 'International Trade City' wholesale market in Yiwu is stacked high with Christmas trees, decorations, and gift toys. Over 22,000 items destined for more than 100 countries that celebrate Christmas are packed into the market. The International Trade City in Yiwu accounts for as much as 70% of the global Christmas decorations market share. This is why Yiwu International Trade City can confidently claim, "If it weren't for us, even Santa Claus would be out of work."
However, the International Trade City was hit hard by the Trump administration's reciprocal tariff policy on April 3. At one point, U.S. tariffs on Chinese goods reached as high as 200% for certain categories. While most tariffs have now been postponed until next year, a 25% base tariff, a 10% reciprocal tariff, and a 10% fentanyl tariff remain in place, resulting in an average tariff rate of about 45% on Chinese products.
Since the imposition of tariffs, fewer American merchants have visited Yiwu International Trade City to purchase Christmas gifts, decorations, and trees in bulk. According to the British media outlet The Economist on December 19 (local time), China's exports of Christmas-related goods from January to October this year totaled $5.1 billion, down about 12% from $5.8 billion during the same period last year. More than half of China's Christmas product exports go to the United States, but due to high tariffs, U.S. imports during this period fell by as much as $940 million.
Yiwu merchants have shifted their focus to Europe and other Christian cultural regions to make up for the decline in exports to the United States following the tariffs. For example, exports to Germany increased by 22% compared to the same period last year, while exports to the Netherlands grew by 16%.
Since the imposition of tariffs last April, Yiwu has seen a flood of videos promoting product manufacturing origin and laundry methods. TikTok screenshot
There have also been reports of bold 'origin laundering.' This involves concealing the true place of manufacture of industrial goods to avoid tariffs. The most common strategy is transshipment, which refers to transferring goods to another mode of transport (such as a truck, ship, or train) at an intermediate stop before reaching the final destination. The Washington Post reported that "some Chinese manufacturers engage in so-called 'origin laundering' by changing the country of origin during the transshipment process in a third country."
Chinese manufacturers' overseas factories and logistics centers are also used for origin laundering. Products made in Yiwu are shipped to overseas factories, where they are assembled or reprocessed locally before being re-exported to the United States. Gerard DiPippo, a researcher at the RAND Corporation, explained, "Although the final consumer is still in the United States, products from Yiwu International Trade City sometimes enter the U.S. via a third country to avoid tariffs."
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