The Trade War With China Is On

Summary

The Trade War With China Is On The Journal | March 5, 2025

Hosts: Kate Linebaugh, Ryan Knutson, Jessica Mendoza
Guests: Steve Greenspan, CEO of Honey Can Do
Production: Spotify and The Wall Street Journal

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1. Setting the Scene: The Chicago Homeware Trade Show

Timestamp: 00:08 - 01:04

The episode opens at the largest homeware trade show in the United States, held at a bustling Chicago convention center. Hundreds of vendors showcase a diverse range of products—from insulated vegan leather lunch boxes and car diffusers to innovative pottery and home organization tools.

Kate Linebaugh sets the stage by highlighting the vibrant atmosphere and the array of products on display. However, amidst the excitement, a palpable concern looms over the event: the impact of newly imposed tariffs.

Unnamed Industry Expert: “There's a lot of talk about tariffs.”
Steve Greenspan: “Everyone's thinking about it. We're telling our larger customers that the tariffs are going to become higher and it's going to affect us. I'm a little bit worried. It's a challenge, you know, like everybody.”
Timestamp: 00:44 - 01:04

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2. The Genesis of the Trade War

Timestamp: 01:04 - 02:21

The discussion delves into the recent tariffs imposed by former President Trump on Chinese imports, a move aimed at curbing the flow of chemicals used in fentanyl production. These tariffs have sparked significant uncertainty and concern among American manufacturers who rely heavily on Chinese manufacturing.

Kate Linebaugh introduces Steve Greenspan, CEO of Honey Can Do, a company specializing in home organization products. With substantial revenue and major retail clients like Walmart and Amazon, Steve's business is directly impacted by the evolving trade policies.

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3. Navigating Beyond Chinese Manufacturing

Timestamp: 03:12 - 07:57

Steve Greenspan shares his journey of building Honey Can Do from the ground up in 2007, initially relying heavily on Chinese manufacturing due to its established infrastructure, low labor costs, and high-quality production capabilities.

However, the imposition of tariffs in 2018 marked a turning point. In response, Steve began relocating production to Southeast Asian countries such as Cambodia, Thailand, Vietnam, and Indonesia to circumvent increased costs.

Unnamed Industry Expert: “We're moving significantly more to Cambodia, Thailand, more in Vietnam and Indonesia as well.”
Timestamp: 01:27 - 01:35

This strategic shift involves substantial investments, including training new employees and establishing infrastructure from scratch—a process described by Steve as "exceedingly difficult" and "disruptive."

Steve Greenspan: “You don't wake up dreaming of McDonald's fries. You wake up dreaming of McDonald's hash browns. McDonald's breakfast comes first. But I...” Note: This quote appears out of context and seems unrelated to the discussion.

Challenges Faced:

• Infrastructure Limitations: Unlike China’s extensive highway networks, countries like Vietnam face significant logistical hurdles.
  Unnamed Industry Expert: “In China, they have a very wide network of multi lane highways that can bring you just about anywhere that you would need to go... It might take you four hours in Vietnam to do the same distance.”
  Timestamp: 06:49 - 07:26

• Port Delays and Higher Costs: Vietnam lacks deep-water ports, leading to shipping inefficiencies and increased pricing, though still more affordable than Chinese tariffs.
  Unnamed Industry Expert: “But it's still cheaper than paying the tariffs.”
  Timestamp: 07:46 - 07:57

Despite these challenges, shifting production remains a financially viable option to mitigate tariff impacts.

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4. Escalation: Renewed Tariffs and China's Retaliation

Timestamp: 07:57 - 10:23

The trade tensions escalate as President Trump reinitiates the trade war by imposing additional 10% tariffs on Chinese imports in February 2025, followed by another 10% the subsequent day. These measures target to hinder the production of fentanyl, with China responding aggressively.

China’s Stance:
Government Spokesman: “If war is what the US wants, be it a tariff war, a trade war, or any other type of war, we're ready to fight till the end.”
Timestamp: 07:57 - 08:50

In response, Steve accelerates plans to further reduce reliance on Chinese manufacturing, increasingly turning to Southeast Asian nations like Cambodia, Vietnam, and Indonesia.

Steve Greenspan: “We're trying to accelerate it if they have the means to move out to Southeast Asia.”
Timestamp: 08:50 - 09:08

He emphasizes that relocating production back to the U.S. is not feasible due to inadequate infrastructure and higher labor costs.

Unnamed Industry Expert: “Making these types of products within the U.S. the infrastructure doesn't exist and we don't have competitive labor to be able to do these things.”
Timestamp: 09:12 - 09:39

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5. Ripples Through China's Manufacturing Sector

Timestamp: 11:00 - 14:24

The renewed trade war significantly impacts China's substantial manufacturing sector, which is a cornerstone of its economy. Companies face confusion and panic over the unpredictable nature of the tariffs.

Steve Greenspan: “People are definitely confused, fearful, panicked even... It's really hard to predict his next steps.”
Timestamp: 11:14 - 12:13

Chinese manufacturers are in a state of flux, with many contemplating or actively relocating their production facilities to Southeast Asia to evade the tariffs.

Steve Greenspan: “If Trump just put another 10% tariff on Chinese imports... these companies are in a panic and they're just grasping for any Solution.”
Timestamp: 12:51 - 13:33

Impact on China's Economy:

• Dependence on Exports: China's economy, heavily reliant on exports, faces significant strain as production shifts abroad.
• Domestic Challenges: Weak consumer demand and a struggling property market exacerbate economic vulnerabilities.

Steve Greenspan: “China's economy is quite reliant on exports right now... tariffs are definitely hitting China where it hurts at the moment.”
Timestamp: 14:24 - 14:28

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6. The Unintended Consequences and Future Outlook

Timestamp: 15:14 - 17:39

As more manufacturing exits China, concerns grow about further tariff impositions on Southeast Asian nations like Vietnam, Malaysia, and Indonesia. This uncertainty breeds fear among manufacturers, complicating strategic planning.

Steve Greenspan: “This is part of the uncertainty that is going on right now... making people really scared and panicked.”
Timestamp: 15:31 - 16:01

The effectiveness of tariffs in achieving their intended goals—such as bringing manufacturing back to the U.S.—is brought into question. Many manufacturers argue that the U.S. lacks the capacity and competitive labor needed to replace Chinese production effectively.

Steve Greenspan: “A lot of the manufacturers I talk to in the US Say we can't really start building this in the US... There isn't the capacity here to build everything that American consumers want to buy.”
Timestamp: 16:20 - 16:44

Looking ahead, Steve anticipates potential negotiations between the U.S. and China but remains uncertain about the outcomes. He suggests that significant reevaluations may occur if the economic strain on American consumers intensifies.

Steve Greenspan: “What I'm looking for next is if there will be some more negotiation between the US And China and what kind of deal that might look like... when things really start to get painful for the American consumer, that there will be a reevaluation.”
Timestamp: 16:47 - 17:39

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7. Conclusion

The episode underscores the profound impact of the U.S.-China trade war on global manufacturing dynamics. As companies like Honey Can Do navigate the turbulent waters of increased tariffs and shifting production locales, the broader implications for China's economy and global trade relationships become increasingly evident. The uncertainty surrounding future policies continues to challenge businesses, highlighting the intricate interplay between government actions and international commerce.

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Additional Reporting: Clarence Lung and Roshan Fernandez
Production Credits: The Journal is a co-production of Spotify and The Wall Street Journal.

Transcript

[Kate Linebaugh]

Hundreds of vendors crowded into a Chicago convention center this week for the country's biggest homeware trade show.

[Steve Greenspan]

We make these insulated vegan leather lunch boxes.

[Kate Linebaugh]

So these are our car and closet diffusers.

[Steve Greenspan]

All of our pottery has saucers as well as drainage hole to make the perfect home for your plant.

[Kate Linebaugh]

The expo is full of businesses showing off their merchandise, everything from cookware and linens to luggage and vacuums. But this year, the convention has been dominated by one thing.

[Unnamed Industry Expert]

There's a lot of talk about tariffs.

[Steve Greenspan]

Everyone's thinking about it. We're telling our larger customers that the tariffs are going to become higher and it's going to affect us. I'm a little bit worried. It's a challenge, you know, like everybody.

[Unnamed Industry Expert]

Will be paying more and, you know, there's complete uncertainty.

[Kate Linebaugh]

These vendors concerns largely focused on the new tariffs Trump imposed on China yesterday. Many of these companies make products there, and to avoid the tariffs, they're thinking about moving their operations out of China altogether. Like Steve Greenspan, CEO of a company that sells home organization products.

[Unnamed Industry Expert]

We're moving significantly more to Cambodia, Thailand, more in Vietnam and Indonesia as well.

[Kate Linebaugh]

And you're moving to avoid the tariffs from Chinese imports?

[Unnamed Industry Expert]

This is influenced by tariffs? Absolutely. This is an exceedingly difficult, long term, disruptive process.

[Kate Linebaugh]

Welcome to the Journal, our show about money, business and power. I'm Kate LINEBAUGH. It's Wednesday, March 5th. Coming up on the show, Trump's tariffs are pushing companies out of China.

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[Steve Greenspan]

You don't wake up dreaming of McDonald's fries. You wake up dreaming of McDonald's hash browns. McDonald's breakfast comes first. But I.

[Kate Linebaugh]

I called up Steve Greenspan while he was at that Chicago homeware convention. He tried to find a quiet room, but it was hard. Steve is the founder and CEO of a company called Honey Can Do. Honey Can do, that's the name of your company?

[Unnamed Industry Expert]

That's the name of the company. It's a little play off the. The honey do. One of our goals is to try and enable folks to do things around the house. Nothing makes me happier than seeing a Spot that I can organize and make it a little bit more efficient.

[Kate Linebaugh]

What's your sort of crown jewel of your home organization?

[Unnamed Industry Expert]

I would probably say it's the man cave. I've got everything well organized there. I know exactly where everything is. I've got a little smoothie station and have that down to a science.

[Kate Linebaugh]

For protein shakes.

[Unnamed Industry Expert]

Yeah, protein shakes, exactly. I'm a marathon runner and a triathlete.

[Kate Linebaugh]

Steve's company sells products like shelving units, drying racks, and laundry hampers. His customers are major retailers like Walmart, Amazon, and Home Depot. In 2024, he had about $75 million in revenue. How long have you been running this business?

[Unnamed Industry Expert]

So I started Honeycando in 2007, started as a complete greenfield. No employees, no products, no customers, no vendors, no anything, and just built it from there.

[Kate Linebaugh]

To build the business, Steve looked to China, where he developed a network of trusted manufacturers and subcontractors.

[Unnamed Industry Expert]

When I first started getting involved in producing products in Asia, which is the late 90s, early 2000s, China was the place to be. And it was because the infrastructure was there. It was low cost labor, and you could do things efficiently, high quality, and you're able to find partners that understand your needs and can make the infrastructure work for you.

[Kate Linebaugh]

At one point, Steve relied on Chinese manufacturing for about half of his products. And things were going well until 2018, when President Trump in his first term, imposed tariffs on China.

[Unnamed Industry Expert]

So then once the initial tariffs hit China in 2018 and even before that, when there was the talk about it, we and our subcontractors, our longtime partners in China, started having discussions and made plans to very quickly move outside of China.

[Kate Linebaugh]

Steve decided to move some production to Vietnam.

[Unnamed Industry Expert]

This is tens of millions of dollars worth of investment. We're starting with literally a pasture, then building it up from there. You have to train employees that have never made this type of product before. You have to build up your entire infrastructure for raw materials, as well as the cardboard boxes that the products go into. You have to build your transportation network, you have to build your shipping network, because now you're going out of new ports in a new country, and this is a very, very disruptive thing.

[Kate Linebaugh]

Steve's challenges went beyond just building out his operation from scratch. Vietnam hasn't had as much investment as China, and that makes doing business there more difficult.

[Unnamed Industry Expert]

In China, they have a very wide network of multi lane highways that can bring you just about anywhere that you would need to go. In Vietnam, typically it's one highway going from city to city, that's two lanes and you might have a series of trucks that are being slowed down by somebody using an animal to pull them, or it might even be a number of bicycles that are blocking up traffic. And, you know, you might be able to go the same distance in one hour in China and it might take you four hours in Vietnam to do the same distance.

[Kate Linebaugh]

So there's an infrastructure difference.

[Unnamed Industry Expert]

Exactly. And then deep water ports, you know, Vietnam does not have the same access and there's port delays and ship delays and everything else. And it's inefficient and causes higher pricing.

[Kate Linebaugh]

But it's still cheaper than paying the tariffs.

[Unnamed Industry Expert]

The answer is maybe in some cases the landed cost is less expensive than paying the tariffs out of China.

[Kate Linebaugh]

Since 2018, Steve has significantly reduced his reliance on China. Today, only about a fifth of his production is there. This year. Trump restarted a trade war with China. In February, he imposed new 10% tariffs on Chinese imports. Yesterday, another 10% tariff went into effect. Trump has said these actions are to help stop the flow of chemicals that are used to make fentanyl. China said it would hit back with retaliatory tariffs. A government spokesman said, quote, if war is what the US Wants, be it a tariff war, a trade war, or any other type of war, we're ready to fight till the end. Steve now wants to move even more production out of China.

[Unnamed Industry Expert]

So as of now, and this process started even before the most recent tariffs were announced, we started expediting, moving products out of China very quickly and into Cambodia. Vietnam and Indonesia have been the primary targets there.

[Kate Linebaugh]

You're not moving production to the U.S. no.

[Unnamed Industry Expert]

Making these types of products within the U.S. the infrastructure doesn't exist and we don't have competitive labor to be able to do these things. You know, we're talking about, in our case, a drying rack that might retail for under 1999. So it's not even a conversation for our types of products to be made in the United States. States.

[Kate Linebaugh]

Coming up, what all this disruption looks like for the world's second largest economy, China.

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[Kate Linebaugh]

The new trade war between China and the US Is rippling through China's massive manufacturing sector. Our colleague Hannah Meow has been talking to Chinese companies about their experience with the tariffs.

[Steve Greenspan]

People are definitely confused, fearful, panicked even. I've spoken with manufacturers across several different industries, and I think the first reaction is just that they don't know what Trump is going to do next. It's really hard to predict his next steps.

[Kate Linebaugh]

So what do they say they're going to do? Are they going to, like, move or build new production facilities somewhere else?

[Steve Greenspan]

Yeah, companies are in the process of doing that, or were doing it in the months leading up to the election. They're accelerating their efforts, or if they hadn't bought land yet, for example, they're going to buy land. Whatever stage they're in, they're trying to accelerate it if they have the means to move out to Southeast Asia.

[Kate Linebaugh]

So they're relocating production to Southeast Asia.

[Steve Greenspan]

It depends from company to company, and not every company is planning to move all of their production over there. But certainly people I've spoken with are planning to move more of it or trying to get it started. You know, it's something they've been wanting to do or had been talking about doing. But Trump's return to the White House and the very rapid way he's escalating tariffs is certainly putting more pressure on them to do so.

[Kate Linebaugh]

Hannah spoke with a lawyer in southeastern China who works with local manufacturers, and he said his phone has been buzzing with messages and calls from his clients.

[Steve Greenspan]

And they're asking him, what do we do about this? You know, if Trump just put another 10% tariff on Chinese imports. And a couple of his clients, so one is a manufacturer of electrical transformers, and this client was already shifting some production to Malaysia, and another was an auto parts maker looking to start moving some production to Thailand. And both of them asked him, can we speed it up? Is there anything we can do to quicken the process? And he described it as companies being in a panic and they're just grasping for any Solution.

[Kate Linebaugh]

If more and more manufacturing leaves China, what will that do to the Chinese economy?

[Steve Greenspan]

It'll certainly be painful and a challenge to work through. China's economy is quite reliant on exports right now. But China's also a manufacturing powerhouse. It's really hard to replace China. I talked to American manufacturers, Chinese manufacturers, they all say that it'll be really hard to be completely out of China. China has also been working to become the dominant country for industries like electric vehicles and solar panels and some of the more higher end technology items. So that will continue to be an advantage for China.

[Kate Linebaugh]

Can China's economy absorb this shock?

[Steve Greenspan]

Right now, China's economy is quite dependent on exports. It's one of the rare bright spots in the economy and drove a significant chunk of China's economic growth. In China's domestic economy, consumer demand is pretty weak. Households are not spending a ton of money after a property market collapse. It has really weighed on sentiment. And in the manufacturing sector, there is overcapacity in many industries. And that's why exports have become increasingly important for China's economy. And with the US Being a major trading partner, tariffs are definitely hitting China where it hurts at the moment.

[Kate Linebaugh]

Are Chinese manufacturers worried that if they move their production out of China to Vietnam or Malaysia or Indonesia, or say that the US Will then hit those countries with tariffs?

[Steve Greenspan]

Absolutely. This is part of the uncertainty that is going on right now that is making people really scared and panicked, and it's just hard to know what to do in this situation. So Trump has talked about tariffs that are reciprocal or targeting countries with big trade imbalances with the U.S. vietnam is high on that list of targets.

[Kate Linebaugh]

And if one of the goals of these tariffs is to bring manufacturing back to the U.S. but companies are moving to Southeast Asia, are these tariffs having the intended effect?

[Steve Greenspan]

I think that's a question a lot of business owners are asking and economists are asking for sure. A lot of the manufacturers I talk to in the US Say we can't really start building this in the US There isn't the capacity here to build everything that American consumers want to buy.

[Kate Linebaugh]

What are you looking for next?

[Steve Greenspan]

What I'm looking for next is if there will be some more negotiation between the US And China and what kind of deal that might look like. It's hard to see what China could offer that would satisfy the U.S. if we buy more U.S. products, is that enough? If we try to cut down on our trade imbalance, is that enough? And so it's hard to know where this goes from here. I think it will be when things really start to get painful for the American consumer, that there will be a reevaluation.

[Kate Linebaugh]

Before we go, we wanted to tell you that we're planning a live event for the show and we want to know what you think. Take our survey by following the link in our show notes and leave your email address to be the first to know when it's happening. That's all for today. Wednesday, March 5th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Clarence Lung and Roshan Fernandez. Thanks for listening. See you tomorrow.