Thanks Harry, this is very interesting!
Did Apollo (or any of your other sources) predict what would happen with the goods that China would typically ship to the U.S.? Would China shut reduce the production of goods in their factories and begin layoffs of their workers, or flood other export markets with those products instead?
On my end, I thought it would be interesting to ask Grok the above questions. I chose Grok because of it's ability to access real-time resources (most AIs, such as ChatGPT, are trained up to a certain date which can be several months old, or older). Grok's final conclusion includes a note that it is based on "Data as of May 1, 2025).
Below are the queries I asked, followed by Grok's responses (somewhat lengthy, but enlightening).
1. Is there any tangible evidence (such as shipping) that goods from China to the U.S. are being halted or slowed due to the import tariffs?
2. What is the projected impact to Chinese factories if they no longer export to the U.S.? Will they layoff their workers and if yes then what would be the likely response by the Chinese government. Or, is it projected that China would increase exports to other countries instead, and what, if any, response have other countries planned or already put in place?
Grok Response 1 - status of current shipping conditions
Yes, there is tangible evidence that shipping of goods from China to the U.S. has been slowed or halted due to import tariffs as of May 1, 2025. Multiple sources indicate a significant decline in shipping activity, backed by data from ports, industry reports, and company statements.
One key piece of evidence comes from the Port of Los Angeles, a major gateway for U.S.-China trade. The executive director, Eugene Seroka, reported on April 24, 2025, that cargo flow was slowing, predicting a 35% drop in arrivals within two weeks due to the 145% tariffs on Chinese goods making imports too costly for many retailers. This aligns with broader industry estimates, such as Flexport’s report of container bookings from China to the U.S. dropping by as much as 60% since the tariffs took effect in early April 2025. Similarly, ocean freight bookings are cited as being down over 60% industry-wide in the three weeks following the tariff implementation, reflecting a sharp reduction in shipping volume.
Further evidence is seen in real-time shipping data. Bloomberg’s ship tracking showed a roughly 40% decrease in cargo ships departing Chinese ports for the U.S. by late April, with container numbers dropping by about a third compared to early April before the tariffs intensified. In China, ports like Shanghai and Guangdong have reported stacks of unshipped containers piling up, with operations slowing dramatically after the April 9 tariff hike to 125% (later adjusted to 145% with additional duties), as exporters missed deadlines to ship goods before the new rates applied.
Company behavior also supports this trend. Major U.S. retailers like Walmart and Target have warned of supply chain disruptions, with some halting orders from China entirely due to the cost increase. Anbernic, a tech company, explicitly suspended all U.S.-bound orders from China starting April 21, 2025, citing tariff policy changes. Meanwhile, businesses are reporting abandoned freight at ports or delayed shipments as they grapple with the financial burden of tariffs now exceeding 100% on many goods.
These impacts stem from the escalating U.S.-China trade war, with tariffs reaching 145% on Chinese imports by April 9, 2025, and China retaliating with 125% duties on U.S. goods by April 12. The elimination of the de minimis exemption for low-value shipments from China, effective May 2, 2025, has further deterred shipping by imposing duties on previously exempt parcels under $800, adding to the slowdown.
While some of this decline may also reflect a post-front-loading lull—U.S. companies rushed imports before tariffs hit, widening the trade deficit in January 2025—the sustained drop in bookings and port activity points to a tariff-driven disruption. Economists and logistics experts warn of impending shortages and price hikes as the reduced flow of goods ripples through supply chains, with effects likely to hit consumers by mid-May 2025. Thus, shipping data, port reports, and corporate actions provide concrete evidence of a significant slowdown in China-to-U.S. goods movement due to the 2025 import tariffs.
Question 2 - Projected impact, mitigation strategies, possible CCP response
If Chinese factories no longer export to the U.S., the projected impact would be severe, given the significant role the U.S. plays as a market for Chinese goods. In 2024, U.S. imports from China were valued at approximately $439 billion, accounting for roughly 14% of China’s total exports (based on China’s 2023 global export figure of $3.38 trillion). Losing this market entirely would disrupt industries like electronics, machinery, textiles, and toys, which rely heavily on U.S. demand. Factories producing these goods would face reduced orders, excess capacity, and declining revenues, with small and medium enterprises (SMEs) particularly vulnerable due to thinner profit margins.
### Impact on Factories and Potential Layoffs
The immediate effect would likely be production cuts and layoffs. Goldman Sachs estimates that 10 to 20 million Chinese workers are directly tied to U.S.-bound exports, out of a total urban workforce of 473.45 million in 2023. If exports to the U.S. ceased, a significant portion of these jobs—potentially millions—could be at risk, especially in export hubs like Guangdong and Zhejiang. For context, posts on X suggest that recent tariff hikes (145% by the U.S. in April 2025) have already led to factory closures and layoffs, with estimates of 10-20 million workers affected if the trend escalates. While these figures are speculative and lack precise official confirmation as of May 1, 2025, they align with industry reports from April 2025, such as CNBC’s note that factories in Yiwu and Dongguan have paused production and sent workers home for weeks due to lost U.S. orders.
Larger firms might weather the storm by cutting shifts or freezing hiring, but SMEs, which often operate on 5% net profit margins or less, could shutter entirely without U.S. sales. A complete loss of the U.S. market would dwarf past disruptions like the 2018-2019 trade war or the COVID-19 pandemic, with one supply chain expert calling the current tariff impact “way bigger” than the pandemic’s effect.
### Chinese Government Response to Layoffs
The Chinese government would likely respond with a mix of stimulus and redirection strategies to mitigate layoffs, drawing from past playbooks. Beijing has historically prioritized social stability, and mass unemployment could threaten that. In April 2025, after U.S. tariffs hit 145%, Chinese authorities pledged support for affected businesses and workers, signaling “more active fiscal policies” and “moderately loose” monetary measures. Projected responses include:
1. **Subsidies and Stimulus**: The government could expand fiscal stimulus beyond the 6.9 trillion yuan (5.5% of 2023 GDP) floated in late 2024 forecasts, targeting export-dependent regions. Subsidies for struggling factories, as seen during the 2018 trade war, would aim to keep them afloat while they pivot markets.
2. **Domestic Consumption Push**: Beijing has already encouraged exporters to sell domestically via platforms like Douyin and Baidu, with tech firms offering AI tools and subsidies to 1 million businesses in April 2025. However, this shift is limited—products designed for U.S. consumers (e.g., suburban goods) don’t easily suit Chinese urban buyers, and consumer fatigue is growing.
3. **Job Programs**: Temporary job creation, such as infrastructure projects funded by special bonds (2.15 trillion yuan issued in 2024), could absorb some laid-off workers, though not at the scale needed for millions.
4. **Currency Management**: A managed yuan devaluation (e.g., settling at 7.7-7.8 to the dollar, per Economist Intelligence Unit projections) could boost export competitiveness elsewhere, but aggressive depreciation is unlikely to avoid global backlash.
Despite these efforts, fully offsetting millions of layoffs would be challenging. China’s reluctance to massively boost household demand (e.g., a modest deficit increase from 3% to 4% of GDP in 2024) suggests a cautious approach, prioritizing industrial support over broad stimulus.
### Increasing Exports to Other Countries
Rather than fully absorbing the U.S. loss domestically, China would likely ramp up exports to other markets, a strategy already underway. Since 2019, Southeast Asia has overtaken the U.S. as China’s largest trading partner, with trade growing rapidly. In 2025, Xi Jinping’s visits to Vietnam, Malaysia, and Cambodia signal intent to deepen these ties. Other targets include Europe, Latin America, and the Middle East, where Chinese firms like Green Willow Textile are diversifying to reduce U.S. reliance.
Projections vary, but if the U.S. market ($439 billion) were lost, China could redirect a portion—perhaps 30-50%—to these regions over time. For instance, exports to ASEAN grew by 17% as a share of GDP over the past decade, and 2023 saw $17.6 billion in Chinese FDI there, up from $7.5 billion in 2020. However, this shift has limits: Goldman Sachs notes that 36% of U.S. imports from China rely on Chinese suppliers with few alternatives, meaning not all goods (e.g., high-tech components) can be easily redirected. Export volumes might rise (up 12% globally in 2024 per Dutch CPB data), but falling prices (e.g., solar panels) could cap revenue gains.
### Responses from Other Countries
Other countries are already reacting to China’s export surge, wary of overcapacity flooding their markets. Responses include:
1. **Tariffs and Barriers**: The EU imposed up to 45% tariffs on Chinese EVs in October 2024 and is probing subsidies in solar, wind, and rail sectors. The U.S. has 100% tariffs on Chinese EVs and 50% on solar cells, while Canada followed suit. Developing nations like Indonesia (minerals), Turkey (40% EV tariffs), and Brazil (steel and EVs) are also raising barriers to protect local industries.
2. **Investment Shifts**: ASEAN nations welcome Chinese FDI (e.g., Thailand’s solar plants), but concerns mount. Thailand saw 4,300 factory closures in 2023-2024 due to cheap Chinese imports, and Indonesia fears stunted industrialization. Malaysia and Singapore brace for similar pressures in advanced manufacturing.
3. **Trade Diversion Scrutiny**: The U.S. and EU are cracking down on “connector” countries (e.g., Vietnam, Mexico) used to bypass tariffs, with potential duties on ASEAN exports containing Chinese content looming by 2026.
China’s response to these barriers has been restrained with developing nations—tolerating measures to secure mineral access (e.g., Indonesia)—but sharper with the EU and U.S., threatening retaliation like mineral export bans (gallium, germanium in 2023). Still, Beijing avoids broad tit-for-tat escalation, mindful of its trade surplus and economic self-harm.
### Conclusion
If Chinese factories lose U.S. exports, layoffs in the millions are probable, with the government leaning on subsidies, domestic sales, and job programs—though these may not fully compensate. Redirecting exports to Southeast Asia, Europe, and beyond is more feasible and already in motion, but other countries are countering with tariffs and trade defenses, limiting China’s options. The net result: significant economic strain in China, tempered by partial mitigation, with global trade tensions rising as a byproduct. Data as of May 1, 2025, suggests this scenario is unfolding incrementally with current tariffs, offering a preview of a full U.S. export halt.