Trump’s tariffs are making businesses begin to shift there supply chains from China.
Whether President Trump is bluffing or stating his honest opinion that he is comfortable with permanent tariffs on Chinese goods, businesses are increasingly deciding they need to start planning for the tariffs to be around for a long time.
“In terms of moving supply chains away from China, we have many member companies who are currently taking a long, hard look at what that would mean, because you cannot simply move a supply chain from one country to another overnight,” said Kip Eideberg, vice president of public affairs for the Association of Equipment Manufacturers, whose members often source items from China.
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Trade groups say their members have already begin to make adjustments such as altering supply chains. It’s not likely to lead to a resurgence of domestic production, though. If they cannot afford to buy things from China because of the tariffs, they’ll look to other countries, mostly elsewhere in Asia.
“The idea that by placing tariffs on imports on China you are going to all of the sudden force American manufacturers to source from domestic suppliers does not align with reality because there may not be any domestic suppliers,” Eideberg said. “So you just shift the supply chain from one foreign country to another. They’ll be sourcing from Mexico, from India, from God knows where, but not necessarily from the U.S.”
Sage Chandler, vice president of trade policy for the Consumer Technology Association, notes that her group’s members need to plan as if the tariffs will be around for the long term even if the White House “wins” and gets what it wants out of the trade talks with China. That’s because the administration has sought a deal with China that would allow for the immediate imposition of new tariffs if Beijing ever violates the deal’s terms.
“The fear is the tariffs could come off but they could come right back on the next time he is upset with China — or any other country, for that matter,” Chandler said.
Her association learned this the hard way, she says. When the administration proposed its initial round of tariffs on just $50 billion worth of Chinese goods last year, the association lobbied successfully to have some items removed on the grounds that could only be sourced from China. Those items are now likely to be hit with tariffs anyway because the administration’s latest proposal to add $300 billion more items to the tariff list would mean that effectively all Chinese exports would be covered.
“We’ve got about 2,400 member companies. I’m hearing strategies that run the gamut. Some companies are moving supply chains and shifting elsewhere. The majority of that movement is not back to the United States,” Chandler said. Even in the case that the companies shifted sourcing out of China, the products would still be expensive, she said. “Contrary to popular thinking, not everything from China is cheap.”
Her association includes manufacturers as well, and they’re just as worried about the consequences of changing their product lines to reflect changing supply chains and making a bad prediction about future trends. “Some of the fears that I have been hearing are that, ‘What if companies abandon a factory and lose the workers who know how to make or integrate something?’ Have they just trained their competitors to make something?”
At the very least this proves Trump’s Trade War is going to do great damage to China. Some say that they’re just going to move manufacturing to Mexico or another cheap labor country but even if that ended up being the case it would still be a bigger win than it being in China.
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