The US flag flies over a container ship unloading cargo from Asia, at the Port of Long Beach, California; the lengthening US-China trade war is prompting companies to move business elsewhere Photo: AFP/File
business

Tariffs push some U.S. manufacturers to exit China

10 Comments
By Bob Chiarito

As fresh U.S. tariffs on Chinese imports kick in, Illinois-based phone accessories manufacturer Ben Buttolph has been urgently moving production to other Asian countries despite the cost, inconvenience and deep uncertainty.

Buttolph, chief finance officer at Xentris Wireless, expects that his company will never return to China after completing a move that he describes as "a kind of business 'head trauma'."

"It's a huge inconvenience, it's a huge expense," he told AFP after Xentris set up in the Philippines, Taiwan and Vietnam since the trade war between the U.S. and China erupted 18 months ago.

But manufacturing in other developing nations comes with risks, he admitted.

"Building up these supply chains took 30 years in China. China has a lot of infrastructure that some other countries don't yet have. We are trying to have multiple locations certified for all of our products, so that if all of a sudden there's an issue with one of the locations, we just flip the switch."

Reflecting on the impact of tariffs on China, he said: "We're never going to be in that position again -- diversification was one of the intentions we had."

U.S. President Donald Trump's plan to enact 15 percent tariffs on $300 billion in consumer goods imported from China has forced some manufacturers such as Xentris to shift production from the country, while others have absorbed the tariff or raised prices.

The latest round of levies began on Sunday on about $112 billion worth of Chinese goods, according to an analysis by the Peterson Institute for International Economics. The remaining portion of the tariffs are set to take effect on Dec 15.

"We are leaving China and we have no immediate or long-term plans to ever go back," Buttolph said, recalling how his company, which has 68 U.S. employees, sought legal advice on the strategic outlook when the trade war began.

"(Some companies) anticipated that this whole thing was going to blow over and that Xi Jinping and Donald Trump would cut a deal. Our assumption early on was based on advice that this is going to be an ongoing, long-term problem.

"Chances are that it will never be the same in China. There were a lot of folks in the consumer electronic space who may have dragged their feet in terms of setting up relationships and getting the supply chain moved."

Richard Roberts, import logistics manager at California-based PacSun, a lifestyle clothing company, echoed the sentiment that production must move out of China -- even in the face of weaknesses in nations that offer a cheaper alternative.

"The latest round of tariffs is making it almost impossible to import from China," said Roberts. "This calendar year we are planning to move up to 30 percent of what we produce in China to Sri Lanka, Bangladesh and Pakistan."

PacSun, which has 10,000 employees, imports about 900 20-foot containers a year, most of it from China.

"You're going to have delays with factories not knowing how to make the correct timing. Roadways are not built, so containers are taking longer to get to the port," Roberts said.

"You also have to take into consideration the longer transit time. You go from Shanghai, where it's 10 or 12 days by vessel, to something coming out of India that's 30 days, so that's a disruption to your supply chain.

"We have Trump (as president) and it's his agenda, so... what do you do? Your company has to do what it needs to do."

For international law firm Harris Bricken, which helps companies navigate working abroad, partner Dan Harris said the U.S. tariffs on China have caused his business to "go crazy" as companies seek help to avoid tariffs -- often by moving their production from China.

U.S. and Chinese talks are due to resume this month after a sharp deterioration in the trade war in August.

The chances of a breakthrough look slim after Trump tweeted that China was "hemorrhaging jobs and companies" and that Chinese negotiators may be holding out for a better deal in the hope he would lose next year's elections.

Tom Case, a customs broker for 50 years and president of The Camelot Company, a customs brokerage company near Chicago's O'Hare Airport, said that the costs would ultimately be passed onto the US consumer.

"The guy that's losing is the guy that goes to the store to buy a new screwdriver," he said. "The screwdriver is going to cost him 25 percent more than it did before the Trump tariffs. The guy who's buying the screwdriver is the one paying."

© 2019 AFP

©2019 GPlusMedia Inc.


10 Comments
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The guy who's buying the screwdriver is the one paying."

Until he decides not to buy the screwdriver or buy from another supplier. I can guarantee you these tarrifs are eating into sales. I'd it didn't, companies wouldnt be moving. They just don't want to admit it.

I believe this was part of Trumps with the trade war. Hopefully we'll get more US companies out of China. Why do business with a country that steals your IP? China is using Google tech for military use. It's asinine.

2 ( +3 / -1 )

This was Trump’s plan all along.

China,The overfed dragon became a bully and must be isolated.

Take your business/manufacturing plants elsewhere. SEA and Africa await.

3 ( +3 / -0 )

It's interesting how Trump still has some of his clothing line made in China, even though this was all part of his master plan.

Many of these manufacturers in other parts of Asia still needs to import supplies from China, and a good number of them are even Chinese owned or invested- which was already somewhat of a trend before the trade war began, due to higher wages in China.

And this just means that jobs still aren't going back to the US. Even many American companies that manufacture their products in America are affected because they need to import some things that ultimately comes from the Chinese supply chain somewhere around the world.

3 ( +3 / -0 )

Trump the big businessman is making things really difficult for US businesses. Who could have seen that coming.

0 ( +2 / -2 )

Tariffs push some U.S. manufacturers to exit China

But as ThePBot mentioned, it's doubtful many of those jobs will come back to the US, which is what Trump promised. Most of the big US corporations that back him and that he's invested in will continue to have their products manufactured overseas.

Trump still has some of his clothing line made in China

Using White House influence, i.e. that of her daddy, Ivanka had many trademarks approved by the CCP (Chinese Communist Party). Jared also made arrangements with the CCP (Chinese Communist Party) on an investments for visas deal.

It will be interesting to see whether the current tiff between China and the US will have effects on the Trump family fortunes.

4 ( +4 / -0 )

This works in the long run. And, quite frankly, it's the only real option left on the table. I am waiting for someone (other than Akie) to inform me the last time diplomacy worked with China. It is obvious that China has a huge chip on its shoulder and would clearly like to challenge America and they currently are in terms of remote islands like the Solomon Islands, etc.. China has major, major world ambitions and when a country like China has 'ambitions', bad things are bound to happen. Especially if it continues unabated.

3 ( +3 / -0 )

Tom Case, a customs broker for 50 years and president of The Camelot Company, a customs brokerage company near Chicago's O'Hare Airport, said that the costs would ultimately be passed onto the US consumer.

Only in the short term. Soon the US consumer will ignore the now-costly Made in China screwdrivers for the Made-in-Anywhere Else screwdrivers that will be priced less. This has to happen on a global scale, in Asia and Europe. The world created a monster, we bought their lies about a "peaceful rise", naively thinking that the China would become more liberal and join the rest of the international community. Instead they have made money off the world, and turned it into the biggest, most economically and militarily powerful dictatorship in the history of this planet.

1 ( +1 / -0 )

How many more ways can the Great Orange Demented One find to crash our economy - I'll guess six since that's how many companies he's bankrupted. Farmers, autoworkers, construction, steel workers and their families are all taking it in the shorts because of this moron.

Xi just has to crank up the government controlled media and blame everything on Trump and the US trying to "humiliate" China, stoking nationalism - and the Chinese public will fall in line. Xi ain't going anywhere - he knows Donne is toast; if not impeached then tossed out in 2020.

Donnie better have his Sharpie ready when the next unemployment and GDP figures are released...and the next Fox News poll...

0 ( +1 / -1 )

In the short run, US consumers will pay more regardless where the products come from because of inefficiency and higher capital costs, and product quality will decline.

In the long run, quality of Chinese products will be even better, less reliance on the US markets; and costs saving from improved efficiency and exchange rate differentials will offset the tariff costs. China will be moving up the ladder and become a developed country with its own domestic consumption to fuel growth. Chinese service sector will be further expanded. But the US standard of living will decline and the poor will be harder to make ends meet. You will see more social problems and gun violence. The restrictive immigration policies will become a drawback and the US will no longer have hard-working immigrants to drive growth. Education will be even more costly. There will no longer be a land of the free. The US will attempt to get into the Chinese markets but the Chinese consumers will be more guarded and the US large corporations will be struggling to hold on to their market shares. The US economy will be stagnant as consumers will be more selective in their purchases because of the higher prices.

Eventually, the new advance technology will emerge more in the East as China and other Asian nations will become more connected, have more well-educated and skilled people, and have better infrastructures to improve the well-being of the people. By then, China will become the largest economy and the main driver’s of the world.

-1 ( +0 / -1 )

But the US standard of living will decline and the poor will be harder to make ends meet.

This has happened already, under "free market" conditions.

0 ( +0 / -0 )

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