“And you know what the worst thing is, the people in Bangladesh they need this money to get out of poverty.” who earns $25 an hour and you have a guy in Bangladesh that gets $2 or $1 per hour, you can put 10% or 20% tariff on it and it doesn’t really matter. Lund added, “The problem is, if you have an industrial worker in the U.S. “To escape the brunt of the trade war, MNCs with operations in China will more likely locate to other low-cost production centers instead of to the U.S.”
“Multinational corporations are driven by the profit motive,” said analyst firm Nomura. companies “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” However, it is increasingly clear that only half of his order is being heeded. ”Īs U.S.-China trade tensions escalated earlier this year, President Trump demanded U.S. “When you have a more diverse supply chain and there’s some disruption or some problem you can increase output quickly in some of the areas and compensate,” he added.Īccording to Lund, where prices outside China are lower per hour or per product, “let’s say it’s clothing or shoes or whatever, If that is the price per hour, I would not think it’s possible to move it back. Lund, chief financial officer at DSV Panalpina, believes the manufacturing drift from China due to the trade war is unlikely to be reversed even if a comprehensive deal is agreed by the world’s two largest economies. “That would mean, for example, that a Section 301 investigation that found $50 billion in damages could not be used as the legal basis for $500 billion in tariffs.” “On the policy front, relief for companies will come when we return to a more orderly and less capricious approach to trade policy,” he added. concerns about China is close and expects diversification by OEMs to continue. Levy thinks it highly unlikely that a comprehensive deal that addresses the bulk of U.S. And there are other irritants to the relationship that could provoke backsliding.” There were lots of ambiguities in the agreement – there were measurable criteria that will not be met, agricultural purchases, for example. 15 tariffs would be trading freely,” he added. “There is a reasonable chance that this truce could hold for the coming year, in which case the goods originally slated for Dec. While some tariffs were postponed (List 4b) and others are the subject of reduction promises (List 4a), Levy believes it is still far too soon to sound the all-clear. imports from China, there was no tariff relief. “It’s worth remembering that for about $250 billion of trade, almost half of U.S. “The trade conflict certainly accelerated that,” he added. Phil Levy, Flexport Chief Economist, said the evolving production landscape in China had prompted companies to look at alternatives to China, “or at least a ‘China plus one’ strategy,” even before the onset of the trade war.
“Regardless as to whether a trade deal will be reached between the two countries, this need for diversification will continue into 2020,” he added. Raymon Krishnan, President of Singapore-headquartered The Logistics & Supply Chain Management Society, said the “ABC or ‘Anywhere But China’ movement” started as far back as 2011 and had been given fresh impetus by the trade war. Tariff risk aside, there are other risks worth the diversification.”ĭr. “The trade war has been a valuable lesson for companies on what their supply chain strategy should be moving forward. “Companies will continue to diversify their supply chain despite the truce,” said Vivien Cheong, regional sales manager APAC at Ticontract & Tim Consult. With no guarantees that the tariff war will end any time soon and with the benefits of diversification becoming clearer to original equipment manufacturers (OEMs) by the day, supply chain insiders expect further migration of production out of China to other parts of Asia. Issues with market access and regulatory restrictions (21.1%) and rising labor costs (19.7%) were also prominent push factors. to pull back from another escalation of their mutually destructive tariff war is unlikely to stop the continued migration of multinational corporations (MNC) from China as they seek to avoid tariffs and diversify risk.Īs reported in FreightWaves earlier this month, a shipper survey by Resilience360 found that 36.1% of those companies looking to relocate operations from China to another country were doing so because of prohibitive U.S. Author: Mike King Originally published at /The decision by China and the U.S.
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