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China may not be quite the trade partner it was for South Carolina a few years ago, but it’s still a key market for many Palmetto State industries.

State exports to China in 2023 were valued at $3.98 billion, down 39 percent from 2019, when it totaled $6.5 billion. Still, China remained the state’s third-largest export market, behind Germany and Canada. In all, about 11 percent of global goods exported by South Carolina operations went to China in 2023, according to the International Trade Administration.

And China is South Carolina’s largest import partner, with $8.2 billion worth of goods being brought from China to South Carolina in 2023, the most recent data available. 

All of which is to say that the ongoing back and forth in recent months between the United States and China over tariffs has been unsettling for businesses operating in the state and beyond. 

“We’re in a wait-and-see period because we don’t know what’s going to happen,” said University of South Carolina research economist Joey Von Nessen. “As businesses look ahead and try to assess what their costs are going to look like, it causes things to slow down because uncertainty tends to breed paralysis.”

The most recent development took place May 14, when an agreement between the U.S. and China was reached to both suspend tariffs enacted in April and reduce tariffs on most goods to 10 percent for 90 days.

However, some higher tariffs remain in place, including a 25 percent charge on steel and aluminum products, automobiles, and automotive parts from China.

The agreement was significant because tariff rates between both countries had risen to 125 percent or more. 

Major industries in South Carolina at risk from tariffs include manufacturers that sell to China, and companies that sell pulp, paperboard, and agricultural products, according to Mike Walton, an economist with North Carolina State University.

Tariffs are fees the federal government charges on a product or service imported from another nation. The domestic company importing the foreign product or service is responsible for paying the tariff, although some or all of the cost is often passed to consumers.

Trump enacted tariffs against China as a means to hold the Asian power to promises that it would halt the flow of drugs used to manufacture fentanyl and other illicit drugs, shut down money laundering by transnational criminal organizations, and curb unfair trade practices. 

Trump’s second term in office began on Jan. 20, and within two weeks the U.S. had enacted tariffs of 10 percent on all imports from China. China retaliated with 10 percent tariffs on U.S. imports a few days later.

Additional tariffs were passed in March and April, with U.S. tariffs on Chinese products reaching 145 percent and Chinese tariffs on U.S. imports hitting 125 percent in mid-April.

Also, China’s $800 de minimis exemption, which allows sites such as Temu and Shein to ship cheap goods to U.S. consumers without having to pay taxes and import duties, ended with the May 2 expiration of the loophole. 

The de minimis exception, introduced before World War II, was designed to bolster trade by removing administrative burdens involved with collecting small duties on low-value goods.  

The two countries have until Aug. 12 to negotiate a new agreement. On that date, a 34 percent reciprocal tariff will be reinstated unless China and the U.S. agree on another tariff suspension.  

South Carolina may have higher exposure to factors impacting trade with China, thanks in part to its bustling transportation sector, said Admir Kolaj, an economist with TD Economics, part of TD Bank Group.

“All else equal, under broad import tariffs with retaliation by trading partners, the Palmetto State could stand to be hit harder than most states in the region,” he wrote earlier this year.

An ongoing trade war between the U.S. and China could cost South Carolina hundreds of millions of dollars annually, according to research from Trade Partnership Worldwide, a Washington, D.C.-based firm that focuses on trade and analysis. 

Some companies operating in South Carolina have seen a considerable drop in exports to China in recent years. In 2017, BMW exported more than 81,000 vehicles made at its Spartanburg plant to China, but that figure had dropped to a little more than 20,000 by last year, according to BMW spokesman Phil Dilaani. 

“The number of vehicles we export to China has decreased over the past several years, but that is because we decided to localize production of the X3 and X5 in the Chinese market for China in 2018 and 2022, respectively,” he said. 

While it’s unclear what the duration or impact of a new tariff war between China and the U.S. will be, most major corporations started working on contingency plans long ago. This includes Techtronic Industries, which designs and manufactures consumer and industrial products under such brands Milwaukee, Hoover, and Oreck, and has a 1-million-square-foot manufacturing plant and warehouse in Anderson.

“Our global manufacturing and supply chain footprint allows us to adapt to any macro political situation,” Techtronic CEO Steven Richman told stock analysts last August. “We have manufacturing capabilities in multiple locations, including the U.S., Mexico, Vietnam, PRC, and Europe.”

And some companies have already taken steps to try and reduce the impact of tariffs, with increased talk of shipping finished products to other countries.

South Carolina manufacturers involved in trade with China have been down this path before. Trump enacted tariffs against an array of nations in 2018 on a variety of items, including steel and aluminum. China responded in kind, implementing levies on more than 100 American items. The tariffs were relaxed the following year.