Chinese Factories Slash Wages Amid US Tariff Pressure

Chinese factories are feeling the strain from escalating U.S. tariffs, pushing owners to adopt drastic cost-cutting measures. In Foshan, kitchen cabinet manufacturer Mike Chai has reduced wages by nearly 30%, shortened worker shifts, and placed employees on unpaid leave to keep operations running. His workforce has already been cut in half since the pandemic, now standing at about 100.

Many manufacturers are relying more on temporary labor to avoid long-term obligations such as pensions and insurance. This shift has increased underemployment and weakened consumer confidence, even as official unemployment figures appear steady.

Exports to the U.S. dropped by more than 21% in July, while shipments to markets in Australia and Southeast Asia rose sharply, showing a pivot in trade routes. Wage cuts and shrinking job opportunities are hitting rural migrant workers hardest. Meanwhile, inflation in retail sales has flatlined, adding to the deflationary pressure across the economy.