Trump’s tariffs are taking their toll as his plan to bring business out of China after years of America being essentially ripped off by the country’s tariffs is coming to fruition!
Major companies, especially in the tech sphere, are either pulling manufacturing out from China or considering doing so because of Trump’s tariffs on Chinese imports to America.
Among the biggest names of those already taking manufacturing for their products elsewhere are Yeti Holdings Inc, Crocs Inc, and iRobot Corp.
Apple is another company considering pulling manufacturing out of China.
On Monday, President Trump announced the effects that his tariffs are having on China’s economy in these tweets:
Here's the news of Trump's effectual tariffs having real impact on China that hit Twitter:
The Wall Street Journal has more details on the specifics of what companies are pulling out of China and why:
U.S. manufacturers are shifting production to countries outside of China as trade tensions between the world’s two biggest economies stretch into a second year.
Companies that make Crocs shoes, Yeti beer coolers, Roomba vacuums and GoPro cameras are producing goods in other countries to avoid U.S. tariffs of as much as 25% on some $250 billion of imports from China. Apple Inc.also is considering shifting final assembly of some of its devices out of China to avoid U.S. tariffs.
Furniture-maker Lovesac Co. is making about 60% of its furniture in China, down from 75% at the start of the year. “We have been shifting production to Vietnam very aggressively,” said Shawn Nelson, chief executive of the Stamford, Conn., company. Mr. Nelson said he plans to have no production in China by the end of next year.
U.S. factory activity is slowing as imports from China drop and suppliers in othernations pick up some of the slack.
The moves by U.S. companies add up to a reordering of global manufacturing supply chains as they prepare for an extended period of uneven trade relations. Executives at companies that are moving operations outside China said they expect to keep them that way because of the time and money invested in setting up new facilities and shifting shipping arrangements. Companies said the shifts accelerated after the tariff on many Chinese imports rose to 25% from 10% in May.
“Once you move, you don’t go back,” Mr. Nelson said.
The Washington Examiner also had the following to say:
U.S. manufacturers are moving parts of their businesses out of China to avoid paying U.S. tariffs from President Trump's trade war.
Yeti Holdings Inc., iRobot Corp., Crocs Inc., and others are moving production out of China to countries such as Vietnam, India, Taiwan, and Malaysia, according to the Wall Street Journal.
"We have been shifting production to Vietnam very aggressively," said Shawn Nelson, CEO of the furniture-maker Lovesac Co. "Once you move, you don’t go back."
Companies that relocate from China are unlikely to move production back because of the high cost of moving operations. The cost is worth it to move out, though, to avoid tariff rates that hit as high as 25% for companies without an exemption.
Bloomberg also commented on the situation:
The world’s largest supplier of consumer goods says China’s factories are getting “urgent and desperate” as worried U.S. retailers accelerate a move out of the country amid heightened trade tensions.
China will see more factory shutdowns as the trade war that’s roiled the global supply chain exacerbates an exodus, said Spencer Fung, chief executive officer of Li & Fung Ltd. The company, which designs, sources and transports consumer goods from Asia for some of the world’s biggest retailers including Walmart and Nike, is being pushed by American clients to shift production out of China.
“U.S. clients are definitely very, very worried,” Fung said in an interview with Bloomberg. “Everyone is making razor-thin margins already and most people have a huge percentage in China. So if the biggest source increases the price by 25%, they are worried,” he said, referring to the scale of tariffs threatened on all Chinese imports to the U.S. by President Donald Trump.
Though Fung didn’t specify Walmart by name, the U.S. retailer is the company’s second-biggest customer after Kohl’s, accounting for 7.6% of revenue, according to Bloomberg data. A spokeswoman for Walmart declined to comment.
Because of its position as middleman connecting American retail giants to low-cost Asian factories, Li & Fung has a unique, ground-level perspective of the seismic shifts taking place around the world due to the trade war. Although the U.S. and China have resumed talks on a deal, there are growing signs that the global supply chain, long reliant on China as the factory to the world, is being permanently transformed. Intel has said it’s reviewing its global supply chain, while others including Apple and Amazon are reportedly doing the same.
“Nobody’s investing, nobody’s buying. The trade war is causing people to stop investment because they don’t know where to put the money,” the Silicon Valley-trained CEO said. “Many people put the money into Vietnam with one tweet,” he said, referring to Trump’s habit of announcing American trade policy over the social media tool.
The Hong Kong-based supply chain and logistics provider, which relies heavily on trade between the world’s two biggest economies to make its fortune, will see China’s contribution to its total sourcing fall from 59% in 2015 to less than half this year for the first time.
While Chinese factories suffer, manufacturers in other Asian hubs become beneficiaries -- up to a point. American retailers have already taken up all the manufacturing capacity in Vietnam in their rush out of China, said Fung, highlighting the lack of scale that prevents other destinations from fully substituting for China’s manufacturing might.
“Vietnam, for example, is full, completely full,” he said. “There’s no extra capacity for the U.S. companies to get in.”