Will Donald Trump’s trade war with China see an end to Dropshipping and Amazon? In this post, we dig deep on what this war means for you as an online seller.
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No, the headline isn’t clickbait: This trade war is real.
And while we hardly ever talk politics, we sure do care about our followers and how external factors can impact us as online sellers.
That’s why today’s post is going to be a little different. We’re going to unravel the trade war between the United States and China and explain how it will affect you as an online seller.
(And promise to make this political post feel as unpolitical as possible)
NOTE: This blog is politically neutral. We will not talk about any political opinions on it.
Let’s get started by looking at what a trade war is and how the United States and China got locked into one.
What is a trade war?
a trade war is when Country A increases the tariffs (import taxes on products imported from country B), to discourage people from importing them in the first place.
In retaliation, Country B then increases their tariffs (import taxes on products that they buy from Country A). This back-and-forth retaliation is what we call a trade war.
And this is exactly what has been happening between China and the USA. On June 15th, Donald Trump declared in a short statement that the United States would impose a HUGE 25% tariff on $50 billion dollars’ worth of Chinese imported goods in response to unfair trading practices.
A lot of online sellers were quite scared at that announcement because a 25% tariff would be more than enough to kill the profit margins for many, many sellers – and thus potentially kill a lot of businesses.
In addition, Trump also announced on that if China responded with their own tariffs…
That the USA would impose 10% tariffs on an ADDITIONAL $200 billion dollars’ worth of Chinese imported goods.
China responded. Pretty much immediately. And they ended up imposing their own similar tariffs on USA imported goods. And thus, China and the USA are now locked in an economic battle.
Chances are, most subscribers to Wholesale Ted either own or are starting online businesses and stores like Dropshipping store and Amazon FBA businesses that rely on importing goods from China.
So, of course the question is this: what does this trade war mean for YOU, as an online seller?
Why are China’s products so cheap?
It’s nothing new that China’s products are dirt cheap.
The real question is: How?
Usually, the typical response would be the stereotypical “China uses cheap slave labour” to manufacturer their goods.
While it is true some factories still run under poor conditions, in general, China has MASSIVELY improved. When most people think of China they think about the exploitative, hellish conditions of the Chinese factories in the 90s.
Take the Pearl River Delta region of China. It has a lot of factories that produce toys. They even produce toys for some of the biggest brands in the world, including Disney.
Back in the 90s and early 2000s, every year more than 40,000 workers from these toy factories would break or even LOSE fingers on the production line – and really, nobody really cared.
But since 2008, things have been drastically changing, with the introduction of enormous, sweeping labours reforms to protect the rights of the workers.
As a result, the cost of labour in China has gone up a LOT – yet it’s usually still WAY cheaper for online sellers like dropshippers and Amazon private labellers to source products from China, even with the shipping costs.
So, if it’s not because of slave-like child labour … what is it?
The Belt Road Initiative
This is China’s ongoing development strategy to create roads, train tracks and shipping ports to connect it to Europe, Asia and the Middle East.
The Silk Road Economic Belt is a series of 6 land corridors that will contain roads and train tracks to connect China to a slew of countries, all the way over to the UK.
And that’s not all – they also have the Maritime Silk Road that they are building. This is a series of shipping ports that will connect the South China Sea all the way to Africa. China officially announced this development strategy in 2013.
But the reality is that they’ve actually been investing MASSIVELY in this trade network and infrastructure since the 1980s. In the 90s and the 2000s, China invest 9% of its GDP into infrastructure. Whereas most Western countries invest just 2-4%.
How they did it though, is quite controversial to some.
What China did, was offer large loans with relatively few barriers to countries that would normally be considered too risky to loan money to – like Sri Lanka.
Sri Lanka is a risky country to loan money to, because it’s corruption level and political instability is so high. So, if you loan money to them, you’re probably not going to get it back.
But China doesn’t mind this – in fact they welcome it. Because what it lets them do is use that debt to further their Belt Road Initiative.
As a result of not being able to pay the debt they had wracked up to China – which was over $8 billion dollars – the Sri Lanka government made a deal with China. They would give them a 70% stake and a 99-year lease of their shipping port, Hambantota, which had been built of course with money that they had initially borrowed from China.
Some people view this as a win-win. Sri Lanka gets a new port. And China kind of gets a new port too. Some people view this quite differently and have nicknamed it the China Debt trap.
But no matter how you feel about this plan, it undeniably has MASSIVELY impacted China’s position when it comes to manufacturing and trade.
And, even though the USA isn’t connected to this economic silk road, this massive infrastructure network dramatically lowers the cost of producing goods in general. Which is why we all import from China.
If China’s HUGE trade network sounds INCREDIBLY intimidating – as in, so intimidating, that the idea of competing against this sounds SO INSANE – you would be RIGHT.
And the United States government would AGREE with you. And this is why most online sellers don’t actually need to worry about this Trade War.
Let me explain.
China is the empire of common goods. You go to a mall. You go to a K-Mart. You go to Walmart. You go to Target. What do you see? Chinese goods – Chinese goods EVERYWHERE.
In fact, if you look at the top products that the USA imported from China, you’ll quickly see that yes: the top categories include common, everyday goods that average people buy, like electronics and clothing.
And of course, it’s these types of items – kitchenware, clothing, little electronics, that most online sellers, like dropshippers and Amazon FBA sellers, focus on.
Well, know what? Donald Trump has NO INTENTION to compete with China over these. He does not want American factories to manufacturing their own avocado slices.
What he, and the American government are interested in doing, is competing with China when it comes to HIGH-TECH GOODS.
You see: China may have built a Common Goods Empire. You go to a mall and it’s a struggle to find anything that doesn’t come from them.
But in high-tech fields like robotics, aerospace, automobiles, and especially pharmaceutical products? They are currently dominated by other countries, including the United States.
But China has announced that they want to change that with their 2025 Plan – which outlines their strategy for moving in and taking a slice of these industries for themselves.
And THIS is what the United States is warring with China over. THIS is what Donald Trump’s tariffs are all about. NOT the types of items that most small online sellers import and sell.
Remember when I mentioned how the USA has imposed 25% tariffs on billions of dollars of Chinese imported goods?
The products that DID get slapped with the tariff, aren’t even close to what online sellers sell. The majority of these products are either raw materials, or industrial goods that are used in those high-tech industries.
These types of items that most people are importing and selling in Amazon FBA warehouses? These are not on the list at all.
The same goes for Aliexpress items. Donald Trump could care less that you’re importing and selling a self-stir mug from China.
And besides, to be even eligible for import packages to be eligible for tariffs, their value needs to exceed $800.
So as most dropshippers are importing packages that are worth less than $50 – there is really no concern for dropshippers at all.
But what about those $200 billion dollars worth of goods that Trump threatened to target in retaliation as well? Will we have impacted by that?
The answer is it is extremely unlikely that you would be. Again, the vast, vast majority of products on this list are either related to high-tech fields, raw materials or food – and food is another controversial area for the USA and China when it comes to trade.
There were a few common good items on the list that may impact some sellers – but, as expected, the vast vast majority were not targeted.
This blog post wasn’t to caress your shoulders and whisper, “look – most of the items we sell aren’t on this tariff list. Don’t worry about it!”
No – what we really wanted to do, was help explain the situation, so that in the future, if things escalate between the USA and China, you will KNOW and UNDERSTAND that you don’t need to be afraid.
To conclude, it’s not common goods like this that are being targeted. Donald Trump doesn’t want America to make these themselves: and is more than happy for you to keep importing them.
Before you click off, I’d like to offer you something.
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In it, I’ve included:
- How just one “winning item” can earn $10k/month. Yep. A lot of people don’t realize this… but most stores make the majority of their money from just a handful of items!
- The right way to choose AliExpress suppliers. Picking the right AliExpress dropshipper is crucial to drastically reduce things like refunds. Learn how to pick the right suppliers.
- Why long shipping times DON’T matter. A lot of people are scared to start Dropshipping because of “long” shipping times. You’ll learn why this doesn’t matter inside.
- Why their stores take 2 hours a day to manage. You’ll learn how they utilize apps like Oberlin to make their stores semi-automated… making managing orders super simple!