Among the main drivers of Beijing’s climb-down were internal signals that Chinese companies were struggling to avoid bankruptcies and to replace the U.S. market, three people familiar with the Chinese government’s thinking said.

Some areas feeling immediate impact were furniture and toy makers, as well as textiles, said one of the officials.

U.S. diplomats in China have also been closely monitoring factory closures, strikes, and job losses in the industrial heartland in southern China.

One of the officials said Chinese companies were struggling to replace the U.S. market because developing nations cannot buy as many items, and that for many firms this was an existential threat that needed to be resolved in days or weeks.

In addition, Beijing was worried it was left without a place at the negotiating table while its major trading partners, such as Vietnam, India and Japan, began talks with Washington, said two officials familiar with Beijing’s thinking.

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