Ed Butler (2:11)

Tariffs, trade and decking the Hollywood That's Business Daily from the BBC. The sound of traders in the town of Yiwu in central eastern China attempting to master Spanish language skills like these are important because Yiwu is a major international trading hub, especially at this time of year, selling commodities to a global market. Once a small rural town, Yiyu began gaining a reputation back in the 1980s for its Open air market selling small commodities. Now it's a sprawling international trade center spanning hectares and several floors. While government investment helped to turn Yiwu into global hub, it's Basically a spirit of entrepreneurship that drives the trade in everything from toys to, to most famously its Christmas decorations.

Han Lin (3:15)

So as much as people outside of China tend to think so, much of China's economic policy is top down driven. In fact, a vast majority of it is Bottoms up, where you have a number of entrepreneurs testing the market. And given the large population and the global demand of goods, they're willing to try to experiment, take a risk, see what sells, and then try to scale it up over time.

Ed Butler (3:38)

That's Han Lin, China director for the consultancy the Asia Group.

Han Lin (3:43)

Yiwu City is. If you were to imagine that Santa Claus has outsourced all of the production of everywhere and everything he produces, it would likely be found in Yiwu City, the international trade city, which has 2.1 million different types of products for sales, divided by six 75,000 booths selling anything you can imagine and couldn't imagine. 60% of all of the global production of Christmas ornaments, for example, are all produced in Yiwu. And Yiwu sells to about 500,000 buyers from 200 countries around the world. So you can guess from a sense of trade perspective, YIWU is very highly dependent on global trade.

Ed Butler (4:34)

It's not just this city, is it? I mean, there are cities across China that specialize in one thing. They make umbrellas or they make shoes, or they make whatever. That's an idea that dates back decades, doesn't it, in China?

Han Lin (4:52)

So oftentimes it is true. When you look among the 700 different major cities from 44,000 different counties, local officials, there was a decision that they would specialize on some type of product or goods. And then a lot of businesses would receive tax incentives and subsidies to try to create new products. And you started to develop economies of scale where cities were able to produce things at a competitively much lower price than any other city. And certainly compared to the rest of.

Ed Butler (5:25)

The world, there are 50,000 shops in all. If you were to spend just three minutes in every one of them, it would take you more than a year to get round the maze of arcades.

Renault Joran (5:38)

Here the factory is making all these Christmas products and ornaments are not just in the YBU area, but the fact is that it fits so well.

Ed Butler (5:50)

Renault and Joran is a French exporter running an electronics business based in southern China.

Renault Joran (5:57)

It's one time use and then throw away a very cheap, simple product just has to look good. They've always been very focused on the low end of the market, right? And there's an enormous amount of buyers who really want very low cost and wide choice so they tend to go to that area and they perpetuate this kind of focus on low cost, low cost, low cost. They just keep seeing buyers that come and say, too expensive, too expensive, give me a little price break. And then it just perpetuates this whole thinking about, okay, we just need to make it cheap, very simple. So the whole operations are geared around that.

Ed Butler (6:38)

I would say cheap maybe, But Ashley Dudarenok, the founder of a Chinese research and analytics consultancy that works with companies in the city, says that Yiyu's distinctive quality is the spirit of enterprise that drives its thousands of traders. It's one of multiple towns and cities in China built around a very specific category of export.

Ashley Dudarenok (7:02)

Well, I would say China likes to plan, and China likes to have centers of excellence. Previously, back in the day, they were primarily manufacturing focused. For example, in Guangzhou, we have a town that's a shoe town or another town that focuses on underwear. And Yiwu focuses on, you know, small commodities or Christmas decor. Some people even call it the world's capital of small commodities, the Christmas capital of the world. And it has many, many other names. We do toys, we do small commodities, we do Christmas decorations, we do textiles, small appliances, apparels. There's a lot of foreigners that come in in companies across Southeast Asia and Africa and Latin America, et cetera. And slowly and gradually, YIWU is becoming a gateway for China's huge market Christmas products.

David (7:58)

How did that evolve?

Ed Butler (7:59)

Just tell me. I mean, talk to me about that. This dates back to the 90s or something.

Ashley Dudarenok (8:04)

Yes, absolutely. First it was really about manufacturing, you know, Christmas decorations. And it was very much focused on the US market. And now becoming the real innovator, a company that I personally know of. They produce Christmas ornaments and they produce Christmas balls. They are able to assemble a Christmas ball in about two seconds. So think about that. And their newly developed machines and factory floors ultimately increased their efficiency by about 20%. So by now they are not just a supermarket for cheap products. They are also an innovation center in many, many ways.

Ed Butler (8:43)

It's weird, isn't it, in a country that doesn't even celebrate Christmas that much itself.

Ashley Dudarenok (8:49)

But today, I would say more and more Chinese domestic consumers are actually purchasing Christmas decorations as year round home decor, not specifically for Christmas, but they are buying it to bring in a bit of this, you know, holiday cheer for their home. But of course, primarily it is an export trade. And today YIWU has, based on some estimates, around 75,000 merchants. And they are working with other regions a lot more than before.

Pets Best Advertiser (9:22)

Protect your pet with insurance from Pets Best Plans start from less than a dollar a day. Visit petsbest.com Pet insurance products offered and administered by Pets Best Insurance Services LLC are underwritten by American Pet Insurance Company or Independence American Insurance Company for terms and conditions, visit www.petsbest.com. policy products are underwritten by American Pet Insurance Company, Independence American Insurance Company or Ms. Transverse Insurance Company and administered by Pets Best Insurance Services LLC. $1.00 a day premium based on 2024 average new policyholder data for accident and illness plans. Pets age 0 to 10 Running a.

Odoo Advertiser (9:52)

Business is hard enough, so why make it harder? With a dozen different apps that don't talk to each other, one for sales, another for inventory, a separate one for accounting. Before you know it, you are drowning in software instead of growing your business. This is where Odoo Odoo is the only business software you'll ever need. It's an all in one, fully integrated platform that handles everything CRM, accounting, inventory, E commerce, HR and more. No more app overload, no more juggling logins. Just one seamless system that makes work easier. And the best part? Odoo replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business, whether you are just starting out or already scaling up. Plus, it's easy to use, customizable and designed to streamline every process so you can focus on what really matters running your business. Thousands of businesses have made the switch, so why not you try Odoo for free@odoo.com that's o d o o.com.

Han Lin (10:55)

You'Re.

Ed Butler (10:55)

Listening to Business Daily on the BBC World Service. I'm Ed Butler and today I'm looking at Yiwu, the Chinese city hosting the world's largest wholesale market, which itself alone provides the world with more than half of its Christmas decor. But how secure an industry is this, given the growing cost of all this international trade, especially the trade that's going to the US we're thinking about that too.

David (11:22)

We're talking about a tariff of 10% on China based on the fact that they're sending fentanyl to Mexico and Canada. How soon on those tariffs? Probably February 1st is the date we're looking at.

Ed Butler (11:36)

Ever since the start of his second term in January, President Trump has been introducing, and then sometimes walking back, massive hikes on the import taxes imposed on Chinese goods.

David (11:49)

So if you look at that China, first row, China 67%. That's tariffs charged to the USA, including currency manipulation and trade barriers. So we're going to be charging a discounted reciprocal tariff of 34%, I think. In other words, they charge us, we charge them, we charge them less. So how can anybody be upset?

Ed Butler (12:13)

Just In October, a 100% tariff was threatened in retaliation for China's refusal to buy US Soybeans and restrictions on its rare earth exports. There was subsequently a deal between President Xi and Trump, but the precise terms of any enduring trade truce still remain elusive. It's left many traders in Yiwu predictably frustrated. Trang, he's a joke. He tells jokes every day. Imposing tariffs is like a joke to him. We used to have buyers from the.

Odoo Advertiser (12:52)

U.S. now we don't care.

Han Lin (12:54)

We have rich buyers from elsewhere. Doing business with them is good.

Ed Butler (12:59)

The 75,000 stallholders in Yiwu are no longer as reliant on the US as they once were, switching exports to other countries instead. Which, it should be said, may be a headache for the US Consumers preparing their Christmas decor this year. In this sector, as with other imported goods, prices are rising in America. And Mac Harmon, the founder and CEO of Balsam Hill, which is perhaps the leading brand in Christmas decor in North America and Europe, is feeling the pinch.

Mac Harmon (13:29)

The vast majority of the goods that we're sending to the UK or the United States come from countries like China, Southeast Asia, India, the Philippines, and they have all been hit with these tariffs. 19, 20%, 30%, and 50%.

Ed Butler (13:46)

Are you charging more this year?

Mac Harmon (13:48)

We are in the US market. We've had to raise our prices at least 10%. It kind of depends on the category. So, as an example, snow globes, you know, a wonderful holiday treat. We just didn't order those this year. We ordered those, and then we canceled the orders because the tariffs were so high on those that we just decided it didn't make sense to bring in Christmas lights, fairy lights that you hang all over your house. All the advanced ones are generally manufactured in China, and those for most of this year had a 63% tariff. And we looked at that category, and we said, these prices are just too high for consumers. And so we also canceled those orders. And so, as a company for whom our purpose is to create joy together, bringing joy to folks at Christmas, it's saddening to not have some of these products that we know bring so much joy. But at the same time, we were doing this to adapt so that we can bring joy through the products that we do have to retail this year.

Ed Butler (14:44)

No snow globes in the US this year.

Mac Harmon (14:47)

Not from Balsam Hill, maybe from elsewhere, but not from us. You know, it's difficult for the consumer because now something costs 10, 15, 20% more. Across all U.S. retailers, Christmas tree prices are up 10 to 20%. We track very closely. And that's just a real significant cost. At the same time, if you have a child, it's really hard to tell them that you're not getting a Christmas tree this year. If you've, if you've moved or don't have a Christmas tree from last year to use the kids. First question is, where is Santa going to put the presents? So you really need to have the tree. Maybe you don't need to have as many presents under it or the decorations or whatever it is, but you've got to have that tree and it just makes it more expensive to enjoy and celebrate the holiday together.

Ed Butler (15:33)

Oh, you just get an American tree.

Mac Harmon (15:36)

Well, that's, that could be in the, that could be in the future. I mean, if, if you're referring to manufacturing trees, pre lit Christmas trees have never been made in the US and the reason for that is because, you know, stringing those fairy lights on the trees, it's a lot of work. And while people love setting up Christmas trees and decorating, generally, they don't like putting the lights on. And so back in the early 1990s, when someone had the bright idea to pre light the trees to do all that work in a factory, the American workers who were making unlit Christmas trees said, you know what, thank you, I'm going to go get a job somewhere else. I am not getting paid 40 hours a week to string lights on trees. And so that industry actually moved to China and other places. So I don't think that we're going to ever see pre lit Christmas trees made in the United States. 99.9% of all pre lit Christmas trees are all made in Southeast Asia.

Ed Butler (16:33)

This tariff regime, this could be a feature, right? At least for this presidency, if not longer. How are you going to adapt?

Mac Harmon (16:42)

Well, that's a great question. I think most of us who are running companies serving the US Are expecting these tariffs to stay in place. The Supreme Court, our highest court, may overrule the authority that the President used to put these in place. But the administration has other tools to put similarly high tariffs in place. We are hoping that the President saves Christmas in the future by exempting Christmas goods, which he did back in 2019 as well. So we'll see how that all plays out. But we are, you know, we have raised prices. If the tariffs stay where they are today, we will need to raise, the whole industry will need to raise prices again next year. So we will, we will see how it shakes out. At the same time, our businesses outside the United States, they are up about almost 30%, but our business in the US is down.

Ed Butler (17:39)

So this Christmas season, perhaps consumers should spare a thought not just for their own rising costs, but also for the lost income of those who make a living stringing lights on plastic treasure. Or perhaps they shouldn't. Surprisingly, back in yiwu, there seems to be no sense of a gaping loss in their export market this year. According to the trade consultant Ashley Dudarenok, traders have simply found other markets to tap into.

Ashley Dudarenok (18:06)

Instead, Yiwu's Christmas exports actually grew about 23% year over year between Q1 and Q3, 25. So they reached about 5.2 billion yuan, which is huge. And primarily it is because of the trade war and the limitations that were put in place.

Ed Butler (18:31)

So, I mean, that's just them people jumping in to get ahead of the tariffs which everyone was expecting from April onwards, right?

Ashley Dudarenok (18:38)

Yeah, well, in, in many ways, yes. But at the same time, the industry rapidly diversify, diversified into other markets, for example, Latin America plus 17% EU plus 45% year over year. So they started really pushing into new markets and they set up shop there. The push is real and you can see it across the board.

Ed Butler (19:05)

Is there still a sense of optimism in the export sector in China?

Ashley Dudarenok (19:11)

I think there's a sense of we are going to get through this and there's definitely resilience. I would say people are mildly optimistic. They are not delusional. They do not believe that US business is going to come back, but they believe that they will be able to capture market share from around the world and some portion of American business will come back and ultimately things will get better because there is, you know, technology, there is, you know, the world is a big place and they are resourceful people. So they, they are mildly optimistic, but not because they think what was gone will come back in exactly that shape and form.

Ed Butler (19:54)

Ashley Dudaranok and that's it for this moderately festive edition of Business Daily. I hope you enjoyed it. For me, Ed Butler and my producer David can seasonal cheer to you all.

Pets Best Advertiser (20:13)

While holiday shopping is almost always fun, credit can be confusing. Download the MyFico app now and shop with confidence, knowing that you can stay on top of your credit 24. 7. Get your FICO score straight from the people that created it. Plus free credit monitoring and a free credit report every month. No credit card required. FICO scores are used by over 90% of lenders, so trust the MyFICO app to keep you in the know, visit myfico.com free or download the MyFICO app today.