China's garment factories, particularly those in Guangzhou, face significant challenges due to the termination of a U.S. tax loophole, which previously allowed tax-free entry of low-cost goods into America. Factory owners, like Liu Miao and Liu Bin, have reported a drastic decline in profitability, with tariffs eroding their margins and forcing them to consider relocating operations to cheaper areas within China or even abroad. The economic slowdown in China, compounded by the collapse of the property market, has further strained domestic consumer spending, making it difficult for these factories to pivot to the local market. With platforms like Shein and Temu being affected by the new tariffs, there is a noticeable decline in orders, leading to a reduction in production and closure of some businesses. The Chinese government is pushing for domestic e-commerce solutions, but the shift from export reliance is challenging as the U.S.-China trade tensions continue to escalate.

Guangzhou's garment factories are struggling after the U.S. ended a tax exemption for imports, which previously allowed inexpensive goods to enter the country tax-free, significantly affecting their profitability and market access.

Liu Miao, a factory owner, has seen his profits halved due to tariffs, making it unsustainable to sell on platforms like Amazon, while Liu Bin is forced to relocate his operations due to high rent and reduced orders from Shein.

The economic backdrop in China is grim, as the property market collapse has led to reduced consumer spending, hurting domestic sales prospects for garment producers who previously relied heavily on exports.

Many factory owners are considering moving their operations to regions with lower labor costs within China or to other countries like Vietnam, although tariff increases on Vietnamese imports complicate these plans.

E-commerce platforms such as Shein and Temu have been crucial for Guangzhou's factories to reach U.S. consumers, but with the new tariffs, orders are falling and some companies have halted direct shipments to the U.S.

The Chinese government is encouraging factories to target the domestic market through local e-commerce platforms, yet the transition is difficult due to cautious consumer spending in China.

Despite the challenges, some factory owners remain hopeful that certain niche products, like novelty socks, will continue to find demand in the U.S., questioning the feasibility of the U.S. government effectively collecting tariffs on all low-priced imports.