America is not benefitting from the trade tariffs it imposed on China – at least in terms of the destination of the companies that are leaving the second largest economy of the world because of the tariffs pressures.
Products made in China have become more expensive for American consumers because of the import tariffs imposed by United States President Donald trump on Chinese goods worth more than $250 billion. Such products range from leather belts to refrigerators to motorcycles. And this trade war is forcing companies in the industries of fashion, industrial machinery and electronics who have production lines in China to shift a part of their production process.
“We are flooded by inquiries,” William Ma, group managing director of Kerry Logistics, told the media. This firm is engaged in aiding companies across the world in managing their supply chains. “It all happens after the trade war,” he added.
A number of companies have also decided to keep their production units in China because of enticement of the largest consumer market of the world – the domestic market of China. Such huge markets are not easily available so easily in other parts of the world.
But the bad news for the Trump administration is that those companies that are deciding to shift their assembly lines from China are not moving to the US but instead is seeking ot set up assembly lines in other Asian markets.
The trade war has forced at least one third of the companies operational in China to contemplate moving their production line outside of China, found a recent survey by two American chambers of commerce in China. Interestingly, only about 6 per cent of the respondents participating in the survey were seeking to relocate production in to America.
Cheap labour in countries in Southeast Asia is the destination of companies in some industries shifting manufacturing from China because of the tariffs.
A significant chunk of its production to Cambodia and other countries, said Steve Madden, whose handbags have been hit by a 10% tariff. Currently about 85 per cent of its handbags are made in China which would drop ot about 50 to 60 per cent next year.
“The shift is almost entirely due to the US-China trade conflict,” Steve Madden CEO Ed Rosenfeld said in a television interview. “We have to prepare as though tariffs will be the new normal, but we are hopeful that cooler heads will prevail.”
South East Asia is also being eyed by consumer tech brands manufacturing in China. There has been a flood of inquiries from firms that are seeking to shift their production lines out of China, said Hugh Lo, the vice president of the consumer division at Taiwan’s New Kinpo Group, a company that manufactures electronics for clients like Toshiba and Samsung.
Also hard hit by the tariffs are big industrial suppliers.
But many are being still enticed to stay keep their production units in China because of the unique advantages the market presents for them. According to Harley Seyedin, president of the American Chamber of Commerce in South China, there is need for specialized equipment and highly trained workers for a number of the products that US firms export from China because there is need for fitting exactly to the requirements.
“Their supply chains cannot be adjusted in short order,” Seyedin said in a television interview.
“China just has such a great infrastructure,” Resnick said. “You go to some of these areas in the Philippines or Vietnam, and the ground surrounding the factory is not developed whatsoever.”
(Adapted from Money.CNN.com)