2025 JULY ISSUE
MARKET REPORT
SHORT READ
| PART 2
Contents:
Uniqlo’s Strategy Going Forward
Chinese Migrant Workers Working for Luxury Brands in Italy
China’s Trade Surplus with the World
Europe is Flooded with Cheap Chinese Goods
New Outposts for Vietnam in Spratly Islands
Manufacturing After China
Shipbuilding in the U.S.
China is the Rare Earths Juggernaut
During the Tariff War, China Has Found New Market
Written by Andrew Sia
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From the Desk of the Publisher
In this issue we want to bring out the fact that the trade tariffs have not brought out any positive effect on any nation but only chaotic situation that erupted the supply chain. We have seen the free trade is being trampled. China is getting more agitated, and its trade surplus has dwarfed all the other nations as it has just hit $1.2 trillion.
We are not optimistic going forward as from what we have seen so far for 2025.
The world requires a positive leader who can carry out rationale thinking and go through more stringent analysis before applying that policy, unlike what we have seen has only send the world to scramble for cover.
Uniqlo’s Strategy Going Forward – New York Times, October 8, 2025
Its parent company, Fast Retailing is a major driver among Japan’s most valuable companies and have recently reporting a record profit of $2.8 billion. Its founder, Tadashi Yanai, is consistently ranked as Japan’s richest person, or among the very top wealthiest person in Japan. He began in his parents’ single store in Hiroshima selling men’s clothing. He took over the family business in 1972 and grew it into a Uniqlo store selling volume of affordable casual clothing.
He opened his first store in New Jersey in 2005, but it wasn’t profitable. Earlier on, he started the first overseas store in London in 2001, and quickly it expanded into 21 outlets in Britain. But very quickly in 2003 he shut down 16 of them. People took it as the Japanese version of Gap.
Uniqlo has followed a model with a limited choice of styles, consistent line of staples, manufactured in high volume at cost-effective factories which began in China and later extended to Vietnam and Bangladesh. Uniqlo sent veterans of Japanese garment technicians, which is known as “takumi,” to oversees the operations in overseas suppliers. No question that the quality is impeccable and good for its value.
Its fastest growing market has been in China because of its rising middle class and its garment sizes which are suitable for the Asians. It is said that it has over 1,000 stores in China.
Uniqlo wants to open 200 stores in North America in 2027, which at the moment it has only 100 of them. Yanai admitted that it is a challenge as the tariffs as played by Trump is going to cause problems. Uniqlo is also not going to move its supply chain out of China and the Asian countries. Yanai also ruled out to manufacture in the U.S. as the reasons of the lack of workers and challenging manufacturing environment.
Furthermore, the relationship between China and Japan is not helping Yanai either. He has a tough battle to fight. But so far he is doing well there.
Chinese Migrant Workers Working for Luxury Brands in Italy – FT, November 11, 2025
First of all, Prato, Tuscany, is home to Europe’s most concentrated Chinese community. They are heavily involved in textile and “fast fashion” industry, with tens of thousands residing there, and most of them are from Wenzhou, China. The two cities are intertwined with textile businesses.
In Milan, there are around 40,000 Chinese and they hold residence in China town, which has become a major commercial district, and operate large-numbers of Chinese-owned retail businesses, especially in fashion.
It has been going on for a while over the Milanese prosecutors leading into investigations relating to worker exploitation in the Italian supply chain which is creating damage on the reputation of Italian’s luxury industry. There are already luxury groups that are targeted by prosecutors.
Normally the work would be subcontracted to their suppliers, and they mentioned that they have no tools or any controls to oversee the activities, such as the paying of the hourly rate to their migrant workers.
Luxury brands like Tod’s, Loro Plana, Dior, and Armani, are among the brands which have been placed under court administration over alleged exploitation in their supply chain. The national fashion chamber, Camera Moda, and the Italian government are backing legislation to create a supply chain certification requirement for the industry.
So, I was told that the labor union in Italy is still very strong. In fact, they were notorious when I came across them in the late 1970s. I puzzle now how the migrant workers could have avoided them.
China’s Trade Surplus with the World – FT, December 15, 2025
China posted a record surplus of about $1.189 trillion in 2025 with the rest of the world. Export value for the year was $3.77 trillion, and import is around $2.58 trillion making the large positive balance. In 2014, the surplus was $990 billion. Part of the reason of the growth surplus was the slower imports relatively to exports.
This surplus illustrates China’s export prowess. But on the other hand, it shows the going forward China GDP growth is getting harder as its shrinking labor force and weak productivity. Its weak growth in its employment and wages, falling property prices, lack of confidence for the people’s spending, all these have curtailed its consumption. Imbalance between factory output and domestic consumption gives exports as the only option.
Its investment is coming largely from state-owned enterprises, have not been able to pay dividends in productivity gains, let alone the improvement from corporate profits. Earlier on, the government reined in high-flying private enterprises, the increase of trade tension with the U.S., and these have all cause the loss of confidence of doing business.
China’s economy as seen by itself is close to 5% growth for 2025. It is already clear that it ought to rebalance growth and knows how to bolster household consumption and raise productivity. But it doesn’t see the urgency and instead it is more prepared to use microeconomic stimulus to counter any slowdown in growth. It is using its top-down intervention and the recent anti-involution to control competition that can trigger deflation and drive down corporate profits. But this all doesn’t do much to improve its private-sector’s confidence.
High tariffs to the U.S. market have forced its exports to other countries. Their reliant on exports have caused other nations to elect protectionist barrier against the onslaught of Chinese exports.
China’s focusing on headline GDP growth without trying to fit its economy and rein in its trade surplus is not only a problem for Beijing, but also to the rest of the world.
Europe is Flooded with Cheap Chinese Goods – WSJ, December 19, 2025
With the trade tariffs Trump enforced on China, Chinese have found a way to flow its cheap goods into Europe. Very quickly, the European Union has topped the U.S. as the largest market for China’s $100 billion cheap package blitz for the first time according to Chinese customs data.
In the EU, where packages under €150 (or $175) are exempted from customs duties and in the UK where the threshold is £150 (or $200) and Chinese e-commerce is booming. Since this year, the shipments have raised more than 50%.
Exports of low-value packages to the U.S. has dropped since May with the closing of the loophole known as the de minimis rule.
EU imposed €3 fee on imported small packages starting in May before closing the de minimis entirely in 2028. UK has planned to do the same, but not until 2029.
Earlier on French prosecutors were investigating child sex dolls and brass knuckles on Shein’s website which violated child pornography laws. EU is furious as this could have galvanized the EU’s morality and the people’s sentiment. Furthermore, their retail industry employs around 30 million people they need to protect.
It is not only e-commerce companies like Temu and Shein are doing business in Europe, but also individuals who would receive shipments directly from China and do the repacking before sending them to customers. These shadow logistics networks, mostly run by Chinese immigrants on social media. These are also known as overseas family warehouses. Their charges are lower than commercial warehouses.
Retailers in EU are warning that the cheap merchandises from China are threatening their industry, which has struggled with sluggish consumer spending since the pandemic.
New Outposts for Vietnam in Spratly Islands – WSJ, November 4, 2025
Vietnam has been building a series of remote rocks, reefs, and atolls for heavily fortified artificial islands that expand its military footprint in the Spratly Islands, an archipelago. It is not only in conflict with China, but also with those of the Philippines, Taiwan, Malaysia and Brunei.
From the satellite images, the new islands form 2-mile-long airstrip to accommodate large military aircrafts, storage for ammunitions, and defense trenches.
These outposts allow Vietnam to project power in the Spratly Islands where China also expanded and fortified themselves in the South China Sea.
Geographically, the Spratly Islands are significantly closer to the coasts on Vietnam and other Southeast countries than to China’s mainland, which lies over a thousand kilometers away.
According to the United Nations Convention on the Laws of the Sea (UNCLOS) adopted in 1982 and accepted by most of the countries, that the Exclusive Economic Zone (EEZ) is 200 nautical miles, or 370 km/230 miles. The coastal state has the exclusive rights for fishing, oil and gas, minerals, and energy production, although other states still retain the freedom of navigation and overflight.
As of March 2025, Vietnam had built more than 2,000 acres of artificial land in the South China Sea in comparison with China’s 4,000 acres being created.
In the 1970s and ‘80s, China forcefully seized from Vietnam several features in the Spratly and the Paracel Islands resulted dozens of casualties of Vietnamese troops.
More recently China took control of Scarborough Shoal from the Philippines in 2012, and this caused panics among other countries in the region. Meanwhile, China has pressured Vietnam to cease oil-and-gas exploration in the waters which China claimed its own and challenged Vietnamese fishermen’s access to the Paracel Islands.
China has deployed vessels and aircrafts for longer periods of stopover, without having to restock and refuel on the mainland.
The U.S. State Department only ask the South China Sea countries to resolve their disputed claims to territory in accordance with international law. But China’s island building is seen as a threat to a lot of Southeast Asian economic interests and also has a threat to navigation and international maritime rights. Vietnam’s outposts are not seen as a threat.
Manufacturing After China – New York Times, November 20, 2025
China’s manufacturing scale and abundant labor turned it into a factory juggernaut for decades. It is what I would call indispensable. Trump’s tariff policy has changed the course of the global economy as companies are looking for alternative solutions to combat the shock. At the same time, China has doubled down on making itself less reliant on the U.S. market. This has created the volatility of the two nations’ relationship.
To move factories back to the U.S. is unpractical as so many sectors have relied on China’s supply and the lack of labor in the U.S. and the cost have made it almost impossible.
Vietnam has already been the back up for sourcing from China because of its lower cost and the country has been embracing foreign investments in the recent years. It is becoming a question for how many businesses Vietnam can take from China and among the investors, China has played an important role.
Average tariff rate on Chinese goods is at 47.6% which has come down quite significantly. The situation has eased off for the moment, but on the long term, the risk is not going away as we have seen the competitive relationship between the U.S. and China.
Some of the best-known brands, including Nike, Apple, and Intel, have moved away quickly to scale down their sourcing from China. We can’t blame them as 2025 proved to be a very volatile year for everyone. China has lost the sneaker business to Vietnam, and most of the smartphones and laptops to Vietnam and India.
American retailers are demanding their suppliers to move their productions to other countries. Since this decision is based on geopolitical views, the need for a longer-term strategy is necessary. Near-shoring manufacturing is becoming a consideration. Suddenly people are starting to talk about manufacturing in El Salvador.
Shipbuilding in the U.S. – WSJ, November 11, 2025
Philly Shipyard, once a historical shipyard in Philadelphia, was bought by South Korean naval giant, Hanwha Ocean. It can trace back to its origins before the Declaration of Independence and was integral to the birth of the U.S. Navy.
Now, it has been commissioned to build a nuclear-powered submarine in the U.S. Hanwha bought Philly Shipyard for $100 million, and the shipyard was losing money. Today, it is helping Trump to revive shipbuilding in the U.S., and it is one of the most ambitious projects in the U.S. in decades. Hanwha plans to invest $5 billion into the site to rebuild a shipbuilding workforce and operate under an ecosystem.
So that we know America currently makes less than 1% of the world’s ships. China is more than 230 times the capacity and far more merchant ships than the U.S. Now Trump’s dream is to revive American shipbuilding, it has to rely heavily on South Korean’s help.
This operation will include the repairing of the navy supply ships and assist the American firms to expand their capacity, train their workers, and make their production more efficient. If it is successful, it will serve as a model to other American shipyards to revive the industry.
Hanwha has targeted to build 20 vessels yearly and expand its labor by thousands and add new heavy cranes, bring in robotics, and setup training centers. Hanwha has never built a nuclear-powered submarine, and the U.S. has closely guarded this nuclear technology even from its allies. American law forbids the construction of the U.S. military or commercial vessels outside the U.S., although it is said that the time to build it in South Korea would be quicker. This will require the U.S. House bill to change to make it possible.
Meanwhile Hanwha’s subsidiary has placed a dozen medium-range tankers and liquefied-natural-gas vessels in the Philly Shipyard and the first delivery is targeted for delivery in 2028.
Those shipping rebound has created more opportunities for the young people. Hanwha has also created apprenticeship program to attract the young candidates to apply. The roles lead to union-scale jobs and have a starting annual salary of roughly $48,000. More than 120 apprentices will enter Hanwha. Already the candidates have bachelor’s or master’s degrees, and they are looking for something different.
China will remain the most formidable rival in shipbuilding.
China is the Rare Earths Juggernaut – WSJ, November 24, 2025
The tariff war raised by Trump triggered China to dominate the rare-earths supply, and it is used for its geopolitical leverage. Peak Rare Earths, an Australian mining company, who owned a Tanzanian mining company, lose its control to China lately. Beginning of the year, China began restricting the supply of rare-earth minerals to the world. Western countries started to search for these critical-mineral deposits, only to find that China has bought up many of the rare-earth deposits of lithium, nickel, and others.
China’s huge export of rare earths has kept the price low and stop the Western companies to raise money to exploit new mines. This has been the tactic used by China already for many years.
We have to know that rare earths are vital to sustain its technological industry. The minerals are used in electric vehicles to drones and jet engines.
Stopping Chinese state-owned enterprises to buy up the world’s strategic mines are almost impossible. To protect these critical minerals and strategic industries, the free world is beginning to understand the national security grounds. Already the European Union has opened an investigation into the proposed sale of an Anglo-American’s nickel operations in Brazil to a subsidiary of a Chinese state-owned mining giant, citing the possibility that European steelmakers would lose access to a crucial supply source. Canada has also tightened its investment laws for Chinese companies to buy mines.
During the Tariff War, China Has Found New Market – New York Times, November 13, 2025
Just because Trump imposed steep tariffs on China, American consumers are buying less as the economic outlook isn’t that promising either. But the rest of the world is making up the difference and it is buying more from China than ever. We may ask ourselves who is the winner and the loser in this trade war.
China has offset the decline from America and the authoritarian state can’t slow its manufacturing engine, and instead they switch their export to the European countries, and also to the developing countries. China has continued to dominance world market and continue its massive production investment to cope with its policy to allow it to sell the goods at lower prices.
Since then, Trump has been using his magic stick by pointing the tariff rates higher and lower in according to his personal preference, or we may say to his emotional mood. He insists that his tariffs can revive the American factories and create jobs. This pledge has been contested by the economists and manufacturing experts.
Right now, the world is caught between the two superpowers, and countries like Vietnam surged by 28%, and members of the European Union, up by 11%. They are deeply concerned that the influx of imported goods would risk their home industry.
Other nations, like Argentina, up by 57%, and Nigeria up by 45%. Although this increase is triggered by their buying of low-cost Chinese technologies to modernize their economies, and yet they have brought the imbalance of trade with China.
For products imported to the U.S. have all been trading down, but because of Trump’s policy triggered the flow of goods that originated in China, to reroute through other countries before arriving in the U.S.
With the latest top-down priorities established by Beijing’s industrial policy, China has become also the world’s leading producer of electric vehicles, batteries, and solar panels. Its domestic economy is struggling with its consumer demand resulted them to find export markets.
As mentioned before, China’s economy is planned by the state for its gross domestic product and not follow by the market demand, its recorded amount of steel produced over the years have caused the price to drop.
China also has gained its influence over the African countries as the U.S. pulled back the aid to the continent. We have seen the increase of 42% in those developing economies in Africa.
On the other hand, American consumers are buying more from other parts of Asia, for instance, import from Vietnam increased by 33%, Taiwan increased by 51% and Singapore by 13%.
This is only the first year of Trump’s administration. There are three more years to go, and I can assure you that they will be long and hard to predict. Already Trump is eyeing on the pharmaceuticals and the drones. To avoid the over reliance on certain critical minerals are already being planned. We have to keep our fingers cross.
