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Tariffs? China’s nut and bolt industry has survived them

Jennifer Pak Oct 30, 2018
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A display case at a nut and bolt industry fair in Shanghai in October 2018. Charles Zhang/Marketplace

Tariffs? China’s nut and bolt industry has survived them

Jennifer Pak Oct 30, 2018
A display case at a nut and bolt industry fair in Shanghai in October 2018. Charles Zhang/Marketplace
HTML EMBED:
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More than 700 companies from China’s nut and bolt industry filled an exhibition hall in Shanghai last week with booths displaying their wares. Some products are the size of a thumbnail, while others can be bigger than a book. Manufacturers in this sector export about $5 billion worth of products annually.

While Chinese screws, nuts, and bolts are among the $200 billion worth of exports to the U.S. currently subject to a 10 percent tariff, many manufacturers at the industry fair said business is still good.

“Our U.S. clients think the current 10 percent tariff is acceptable,” said Carrie Mo, of the Tong Ming group. “They’ve just told us to speed up our product delivery.” Her clients are in rush because in January, the tariff may be raised to 25 percent.

Chinese manufacturers must be adaptable, according to Wu Zheng, sales director of Changshu City Standard Parts Factory.

He has been in the nut and bolt industry for three decades and is among the exporters hopeful that the U.S.-China trade war will be resolved soon

Wu said his optimism stems from the fact that his industry has survived worse. After the financial crisis in 2008, orders for Chinese nuts and bolts fell. Wu said some manufactures tried to stay afloat by slashing prices on their products. They set prices so low that the European Union accused them of dumping — lowering prices to gain an unfair advantage. The EU imposed duties ranging from 26.5 to 85 percent in 2009 on steel and iron screws, nuts and bolts from China.

“The tariff on our company was about 60 percent,” Wu said. “A lot of us couldn’t export our products to the EU anymore.”

Industry veteran Wu Zheng said the nut and bolt sector has survived worse than the US tariffs

Industry veteran Wu Zheng said the nut and bolt sector has survived worse than the U.S. tariffs.

China’s Ministry of Commerce estimated that the EU anti-dumping measures affected $1 billion worth of Chinese exports and more than 100,000 jobs in China. Some companies recovered by redirecting their products back to the Chinese market. Others, like Jinan Star Fastener company, turned to the U.S.

“The American market has now overtaken what we previously sold to the EU,” said sales manager Zhang Yuhua.    

She said the company’s sales to U.S. businesses have been expanding at 10 percent a year. Prospects seemed good for Zhang’s firm until the Trump administration announced in September which products would be hit with tariffs.

Zhang Yuhua with Jinan Star Fastener said her firm had just recovered from the EU anti-dumping duties when the U.S. hit her sector with a 10 percent tariff last month.

“When we found out our products were included in the final tariff list, we were stunned,” she said.

Her U.S.-based clients are willing to pay the current 10 percent tariff, but Zhang said a lot of them will stop importing from China if the Trump administration goes ahead with the planned increase to 25 percent in January.

“I think we will see our sales to the U.S. next year reduce by at least half,” she said.

She said the only solution is to once again find a new market, perhaps by returning to Europe. The EU dropped anti-dumping duties on Chinese nuts and bolts in 2016.

Industry veteran Wu Zheng believes trade tensions with the U.S. are only temporary.

“There is no permanent war, only permanent interests,” Wu said. “The trade tariff will be removed once the interests of the U.S and China reach an equilibrium point.”

He hopes that equilibrium point may be reached after the midterm elections.

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