Lingerie manufacturers in China are preparing for possible economic hardships as Trump's tariffs loom. Plans to close a tariff-exemption loophole are also pushing exporters to reconsider their business models.
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00:00Patrolling a sea of lingerie, factory boss Lei Congrui inspects his mammoth stock of
00:07erotic clothing at a warehouse in Lianyungang, a city five hours north of Shanghai that's
00:13home to a county known as China's lingerie capital.
00:17We've been in the underwear business for 18 years.
00:21As long as there are humans, there are lingerie.
00:25Lei's been in the panty-making business since he was in high school, and by his best
00:29guess currently around 100,000 workers produce lingerie in Lianyungang.
00:36Lei says 70 per cent of his revenue comes from sales to the United States, and business
00:41has been booming due to a tariff exemption rule known as de minimis, which allows packages
00:47valued under US$800 and mailed directly to individuals to be shipped tariff-free.
00:55International services group Nomura estimates that around US$240 billion worth of Chinese
01:01overseas sales this year benefit from the de minimis exemption.
01:06But it's a loophole both the Biden and Trump administrations have proposed to close, one
01:12they say is being exploited to traffic drugs like fentanyl.
01:17Coupled with Trump's promise of steeper tariffs on all Chinese imports to the US,
01:21Lei is feeling anxious.
01:24The increase in tariffs is a risk for us.
01:28We are still worried, but we are prepared to do so.
01:34That uncertainty is pushing Lei to consider developing other markets.
01:39But with the EU and other countries considering similar restrictions on Chinese imports, the
01:44livelihoods of the lingerie capital's roughly one million residents hang in the balance.
01:51Yes, I think so.
01:54But this year's sales are not good.
01:57This year's sales are not as good as last year.
02:04I think it's hard to make money this year.
02:08We can't make money.
02:10Despite the looming changes, one professor at a Shanghai business school thinks that
02:15some sectors, like lingerie production, won't be hit too hard.
02:19As Western consumers will be willing to pay a higher price for goods that will probably
02:23keep being made in China.
02:25These are not the ones that, for example, like battery or high-tech stuff that, for
02:29example, you say you have to bring back your production here, your supply chain here.
02:34These are the things that are either going to be there to buy or they're not going to
02:38be there.
02:39So if they're not there, then the consumers, some buyers who want it, they're going to
02:43demand it and they're ready to pay a little bit higher prices.
02:47For now, Lei's search for new business models and clients continues as he and manufacturers
02:53across China are anticipating potentially seismic changes to the largest trade partnership
02:59on the planet.
03:01Hank Hsu and Rhys Ayres for Taiwan Plus.