A pulse check from Ningbo, the epicentre of the tariff war

On May 7-8th EIU visited the coastal Chinese city of Ningbo for an industrial event, where we had the opportunity to talk to government officials, industrial association leaders and business owners. Located in Zhejiang province, Ningbo is one of China’s top export hubs, hosting the country’s second-largest (and the world’s third-largest) container port. The first batch of goods charged with US “reciprocal tariffs”, effective on April 10th, was shipped from the city. It is also a manufacturing powerhouse, home to industries such as refineries, chemicals, electronics and machinery parts.

Why is Ningbo worth watching?

Apart from its aforementioned strategic location, Ningbo is the most heavily dependent on US demand among all Chinese cities. In 2024 25.8% of Ningbo’s exports were shipped to the US, higher than leading megalopolises such as Shenzhen (15%) and Shanghai (15.3%), and other major export-oriented cities such as Suzhou (20.7%) and Dongguan (17.4%). We learned that the US accounts for about 40% of export orders in the local electronics and electrical (E&E) industry. This puts Ningbo at the epicentre of the US-China tariff escalation.

How have tariffs hit Ningbo’s businesses?

Although Ningbo’s exposure is high, the impact primarily depends on firms’ size. According to industrial association leaders, most SMEs in the electrical and electronics sector serving the US market have halted production for two or three weeks, as their US clients had stopped placing orders owing to prohibitive US tariffs. Massive layoffs have not taken place, but there are nonetheless significant risks should tariffs stay elevated.

Larger enterprises have proved to be more resilient, as they have already diversified their supply chains. One company, a lighting producer listed in Shenzhen, reported a surge in orders received by their Mexican factories. Another company, a manufacturer of vacuum cleaners listed in Shanghai, managed the tariff shock through a 2,000-worker facility in Vietnam, a country that is subject to an estimated US weighted average tariff rate (WATR) of 13%, having secured a 90-day pause in its 46% reciprocal tariff rate.

Several companies were also hit by China’s own export controls. Ningbo is a major producer of permanent magnetic materials used in motors for electric vehicles, wind turbines, home appliances and robotics. However, China has tightened export controls on rare-earth metals contained in those materials in retaliation to US tariff escalation, reportedly causing all rare-earth exports to stall during April. Although the export controls on seven rare-earth elements were temporarily lifted as part of the tariff de-escalation, the risk of their re-imposition is high, especially after the US tightened its restrictions on artificial intelligence (AI) chips against China.

The US-China tariff de-escalation has led to a large spike in US-bound shipments. Although the US Weighted Average Tariff Rate (WATR) on China remains in excess of 40%, it is not much higher than the level before “tariff liberation day”, which was about 30%. Exporters have motivation to rush shipments in May-August, given the considerable uncertainty after the 90-day pause ends.

What have exporters done to circumvent tariffs?

In cases where exporters were still able to sell to the US, they employed a number of workarounds. As previously mentioned, one common approach for businesses is to fulfil US orders in third countries. For products that do not require sophisticated manufacturing processes, some exporters license their technologies to overseas producers and share the profit with them. A few firms even rented production lines from other companies in South-east Asia to work on night shifts. Pure transshipment did not seem to be prevalent; in most cases third countries at least process intermediate goods or semi-finished goods before re-exporting them to the US.

Many firms reached agreements with their US clients to ship components—rather than final products—separately to the US, where assembly was done. In this way, firms will avoid tariffs arising from the value-added part of the goods. However, the method only applies to products whose assembly process is not complex, and which carry a high amount of value addition.

Further analysis

To learn more about the broader economic impact of renewed US tariffs across the region, download our latest summary report, Navigating uncertainty in APAC. It offers analysis on how key Asian economies are responding to shifting trade dynamics, policy pressure and geopolitical risk.

You can now watch the on-demand recording to hear EIU’s award-winning experts examine how geopolitical shifts and trade disruption are influencing