In China’s capital of Halloween slime and ooze, the trade war is a scary subject

“There are already no customers. How can we increase prices?” said one merchant here, a 30-something woman sitting among assorted containers of slime, from oozing jack-o-lanterns to glittery tubes labeled unicorn poop. 

Her dollar-store wares — novelties perfect for trick-or-treaters or stuffing stockings — have not yet been hit by tariffs. But sales are down all the same because of the general atmosphere of uncertainty.

The usual shipments timed to reach American stores in time for Halloween and then Christmas have been diminished this year, even as Trump has delayed the next round of tariffs until after the holiday season rush.

“My products are so cheap and the tariffs are so high, so there will certainly be impact,” said the merchant, who spoke on the condition of anonymity because such comments seen as politically sensitive in China. Some 40 percent of her business once came from sales to the United States.

From the widget wholesalers of Yiwu, south of Shanghai, to the halls of Communist Party power in Beijing, there is consternation that the trade war has dragged on for so long and doubt that the next battle could be a turning point. 

The two sides have reached a vague cease-fire. Trump said Monday he expected to sign “a very big portion of the China deal” soon that would “take care of the farmers,” but offered little other detail.

Taoran Notes, a social media account with links to the Communist Party, reported Sunday that “China and the U.S. are gradually moving closer on a position where they can take care of each other’s core concerns.”

The current deal offers China a reprieve from further tariff increases, imposed on $250 billion worth of products, in return for Chinese purchases of at least $40 billion in American farm products. But Trump continues to dangle the prospect of placing tariffs on the remaining $150 billion-plus of Chinese products, including toys, smartphones and computers, on Dec. 15.

The two sides had been set to discuss the deal at the Asia Pacific Economic Cooperation forum in Chile next month, but the host nation on Wednesday canceled it. While House officials have said they will keep working toward an agreement.

“If you read the tea leaves of the last few weeks, it’s pretty clear that the political leadership on both sides seem pretty anxious to get something done,” said Arthur Kroeber, managing director of Gavekal Dragonomics, a China-focused research consultancy. 

In the Yiwu market, a metropolis of 75,000 stores covering a phenomenal 59 million square feet where merchants showcase their products and take orders by the thousand, vendors are also anxious for a deal.

Sales at the market plummeted 64 percent last year compared with 2017, to $5.1 billion, according to the market’s annual report. This was largely because of the trade war, even though the market ships to diverse export destinations, including South Asia, the Middle East and Latin America. 

“The U.S. trade war is not only affecting China, it’s affecting the whole world,” said the slime-seller’s stallmate, who was selling flower garlands and sparkly headbands. The International Monetary Fund made the same observation in its latest world economic outlook.

The vendor had no doubt about where to lay blame.

“Trump is so changeable. The whole world knows this,” she said, barely pausing to look up from her phone. “Even kids know that a promise is a promise, but Trump goes back on his word and changes his mind faster than flipping pages in a book.” 

Although most analysts think the Trump administration’s talk of “decoupling” the world’s two biggest economies is unrealistic — for they are too intertwined — the president has repeatedly voiced hope that the economic pain would force China to heel.

After several turbocharged decades, China’s economy has matured and is now growing at about 6 percent a year, the weakest in a generation. But even those figures could be too optimistic. 

“How can it be possible that GDP grew by 6 percent? When I went to places to observe, research, and talk to people, the local government officials are much more frank about the fact that their regions are experiencing negative growth,” Xiang Songzuo, a finance professor at Renmin University of China in Beijing, wrote in a recent commentary that was censored on the Chinese Internet.

“Clearly, the government should acknowledge that the economy is in dire straits, face this grim economic reality, and set its mind on reform,” Xiang wrote, according to a translation by the China Change website.

 The Communist Party has tried to manage the slowdown, most of which is caused by domestic factors such as rising debt levels and lower consumer spending. The trade war is shaving only a few tenths of a percentage point off the growth rate, economists estimate. 

But that could change next year as the full effect of this tariff battle sinks in.

“China’s economy is under pressure, and if there are more tariffs that will act as another strong head wind,” said Larry Hu, chief China economist at Macquarie Group, the Australian bank, estimating it would take six to 12 months for the tariffs to feed through to the broader economy.

“This is adding more pressure on the economy, but they don’t want to look like they’re surrendering to Trump,” Hu said.

That doesn’t mean Trump has all the advantages. 

Experts point out that the American president, facing a weakening economy and an impeachment inquiry, would like a deal to alleviate the trade war’s effects on agricultural states as the 2020 election approaches.

“I think from the Chinese standpoint, it is a reasonable bet that if they come to an agreement, Trump will stick with it through the election because he just can’t afford any more damage,” said Kroeber, the consultant.

In many ways, that’s a win for China because the two sides would be essentially agreeing to the deal that they brokered in April — but without the requirements for legislative changes in China, the part that triggered Beijing’s objections and led to the talks’ collapse.

Despite the impact, many in the Yiwu market are resolute. 

“The foreign trade business here is not good this year, obviously there has been some impact,” said Chen Taoqing, who runs a toy-exporting business and says there are noticeably fewer customers around now. Shipments to the United States account for about 5 percent of his sales.

But Chen, surrounded by toy drones and remote-control cars, said China would not be cowed. “We have a population of more than 1 billion; we are strong,” he said.

There’s also a widely held belief that the United States and Europe can’t walk away from China. For years, as foreign business leaders have traipsed to Beijing to complain about an unfair playing field, Chinese leaders have responded with: So what? You’re still going to do business here. 

That sentiment was evident in the Christmas quarter of Yiwu. In the blocks of stores festooned with tinsel and fir trees, Shen Gan sat pouring tea among the skiingSantas and reindeer families of his Little Angels Christmas outlet. 

While daily necessities might be available in other countries, Shen said few can rival Yiwu when it comes to the Christian holiday season. Yiwu claims to produce between 60 and 70 percent of the world’s Christmas decorations.

“They need Christmas products in their country,” he said, “and most of what they need can only be bought in China.”

Liu Yang contributed to this report.