"China factories cut shifts and workers' pay as US tariffs bite", 12 August 2025

Mike Chai aims to cut wage costs at his kitchen cabinet factory by about 30% to remain competitive against other Chinese firms, which have stopped selling to the U.S. due to steep tariffs and are now coming after his long-time customers in Australia.

Chai had already halved his workforce to 100 people since the pandemic and says he has no more room to trim. Instead, he is shortening shifts and asking workers to take unpaid leave...

"We're in survival mode," said the 53-year-old, adding that his company, Cartia Global Manufacturing, in the southern city of Foshan, "barely breaks even."

"I told them, you don't want our factory to go broke. You've worked here for 10-15 years, let's do it together."...

Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, says it is China's manufacturing workers who suffer while exports - and the economy - keep growing despite the U.S. tariffs.

"It's the people who are hammered by this model of huge competition, lower prices, thus you need to lower costs, thus you need to lower wages. It's a spiral," she said...

Statistics will not reveal Chinese workers as "the main losers" in the trade war because "they will not become unemployed, but they will get unpaid leave of absence or work fewer hours," she added.

Chai has already lost two key customers in his main market of Australia after other Chinese firms cut their prices and his factory is operating at half-capacity.

"All those who have (left) America have come to Australia," he said. "A lot of new supply is knocking on my customers' doors."

While Chinese exports to the U.S. dropped 21.7% year-on-year in July, they rose by 9.2% to the European Union, 16.6% to the Association of Southeast Asian Nations and 14.8% to Australia.

Chai plans to cut prices by about 10%. To afford that, he is also cutting overtime - which previously made up more than a third of workers' income...

Factory bosses are also turning to temporary workers, hiring them for new orders and dismissing them when demand dries up.

Dave Fong, who co-owns three factories in southern China making everything from school bags to climbing gear and industrial machinery, says he laid off 30 full-time workers at one of the plants, then rehired some of them on a temporary basis to fulfil unexpected orders.

"We prefer temporary contracts so we don't need to pay pension or insurance," said Fong. "It's by day or by hour." 

"If we don't do that, the company hits a dead end. The market is weak because consumption power has decreased. Another factor is trade, especially with the U.S."

"There's a long line of people waiting for job interviews every day, but the factories don't have that much demand," Chen said...

"If manufacturing wages are being squeezed, then the wider economy would feel deflationary pressure," said Richard Yarrow, a fellow at Harvard Kennedy School's Mossavar-Rahmani Center for Business and Government.

"This is definitely a growing issue for some of the lower-skill types of manufacturing in China, such as textiles, furniture, and simple electronics."...