As US tariffs bite China exports, stranded stockpiles of goods are being diverted to domestic consumers

On the third floor of Wing On Department Store on Shanghai's Nanjing Road E., a brand of little-known denim jeans sits among familiar domestic labels. They are not jeans ever intended for this market.

With 145 percent US tariffs on Chinese imports and overseas orders falling sharply in April, Chinese exporters are under pressure to redirect backlogs once bound for foreign buyers. Shanghai has become a leader in the campaign to find replacement markets domestically.

Bailian Group, Wing On's parent and Shanghai's largest state-owned retail group, is among the Chinese mainland companies heeding the call from city officials and making room on their shelves for stranded export stockpiles.

In the first two days after the denim display appeared, more than 20 pairs were sold, according to a mall employee. While modest in absolute terms, the figure was described as a "decent start" by store staff, especially for a brand with no prior exposure to domestic retail channels.

"I never heard of the brand before," one shopper said. "The salesperson explained that it used to be for export. The quality seemed solid, definitely up to standard."

The jeans manufacturer, Guangdong-based Baoxi Garment Co Ltd, used to export about 80 percent of its production to the US. Now it has tens of thousands of jeans with its chief buyer in absentia.

On April 24, the company sought out Bailian, and within a week, its jeans were on display at Wing On, with the retailer managing all the logistics. The company didn't even have to send a representative to Shanghai during the process.

Under normal conditions, taking on a new brand would require at least a month, according to Chen Hui, manager of tenant operations at Wing On. "And if we followed standard procedures, the supplier would provide its own display equipment and staffing."

This time, the store took over control entirely. Fixtures such as clothing racks were pooled from neighboring counters, and sales staff were temporarily reassigned from other departments to cover the display booth.

Shanghai has taken the lead in matching oversupplies with major retailers that include Yonghui, RT-Mart, Bailian and Hema. More than 80 export-oriented companies are taking part, with at least 68 preliminary agreements reached for goods ranging from household appliances to luggage and pet accessories.

"We didn't expect a pharmacy chain to be interested in our travel bags," said Wang Jiagang, operations director of Jinwang Luggage. "But Shanghai's retail network is showing more diversity than we anticipated."

While this collaborative effort may offer some short-term relief, questions remain. For example, will a flood of export goods redirected to the domestic economy cause deflationary prices and disruption to normal domestic suppliers?

Then, too, many export manufacturers are unfamiliar with local retail channels, lack brand recognition among Chinese consumers and often have limited capacity to provide after-sales services. For department stores and supermarkets, hosting under-the-radar labels with unproven market traction carries commercial risks.

China's export sector has held up well so far in the tariff war. Shipments overseas in the first quarter rose, but warning signals are appearing. New export orders in April fell to 44.7 percent from 49 in March on an official index.

While some exports to the US are expected to continue, particularly in categories where American importers have few alternatives, high tariffs have rendered a large portion of trade to the US uneconomical.

"There are still products the US simply has to source from China," said He Weiwen, a senior fellow at the Center for China and Globalization and Executive Council member at the China Association of International Trade.

China exported roughly US$520 billion worth of goods to the US last year; US$120 billion of goods were already shipped in the first quarter of 2025, which include a period of weeks before tariffs were imposed.

While a full collapse of exports is unlikely, He said, "that still leaves about US$400 billion. Not all of it will be blocked."

As of December last year, the US imported more than 50 percent of 2,665 product categories from China, including 500 categories on which the US was wholly dependent. And certain electronics have been exempted from tariffs. Some US retailers like Walmart are still sourcing goods from China, despite higher duties, to ensure their shelves don't run empty.

"The tariffs are paid by the importers, not the suppliers," He said. "It's their choice whether to increase prices or absorb the extra cost. The flow won't drop off completely."

It's estimated that US$100-200 billion worth of consumer goods originally intended for export may be redirected into China's domestic market.

"That's nearly 1 trillion yuan," He said. "It won't be easy, but the retail system does have the potential to absorb it, if the execution is right."

For a substantial share of exporters, the path looking out longer-term will require either finding new overseas markets or pivoting their structures to cater to domestic sales.

To speed the entry of export-bound goods into domestic circulation, Shanghai's leading retailers have launched a series of fast-track measures, like repackaging inventory, creating dedicated shelf space and slashing launch timelines.

Supermarket chains like RT-Mart and Yonghui are working directly with suppliers to host flash sales and reconfigure product lines to accommodate the goods.

"We're helping suppliers clear backlogged inventory in two ways," said Qin Cong, general merchandise director of RT-Mart China. "One is through limited-time sales, once the products have been relabeled and certified by domestic standards. The other is through made-to-order partnerships, where we collaborate on tailored product lines."

Yonghui, meanwhile, has begun installing export-only sections in some stores across Shanghai and is in talks with over 300 suppliers.

Lianhua's "Back Home" campaign promises a seven-day shelf launch timeline, while Hema has simplified compliance checks to shorten the path from warehouse to store.

Still, domestic sales are just one part of the adjustment. The US accounted for only about 13.5 percent of China's total exports last year, leaving significant room for tapping other markets.

Many exporters are now looking at Southeast Asia, Latin America and the Middle East, but building new trading relationships in these regions will take time and possible adaptation of products to local preferences.

In the meantime, Shanghai plays a prime role as a gateway in the process of handling the export backlog. With inbound tourism on the rise, high-traffic retail hubs like Nanjing Road are drawing many overseas consumers who may be receptive to the same products that once arrived on their shores.

The shift to domestic sales means that many homegrown brands will be competing with low-cost, export-grade inventory sitting alongside them on shelves. Some see that as a beneficial impetus.

"What used to be sold abroad is now pushing our internal system to upgrade products," He said. "It's a disruption, but also a chance to turn pressure into momentum."