Workers are caring for bears in a factory in Ankang, China.
CNBC
As Washington, Beijing Flares of trade tensionsChinese manufacturers are scrambling to adjust their supply chains and signing up for escalating tariffs.
The additional 10% tariff on Chinese goods that U.S. President Donald Trump brought the accumulated new tariffs in about a month to 20%.
Fresh tariffs are coming On top of several current taxes Regarding China’s imports, carried out under Biden’s management, include 100% of electric vehicle responsibilities, 50% of solar cells, and 25% of steel, aluminum, electric electric electric batteries and critical minerals.
According to estimates by Nomura’s chief Chinese economist Ting Lu, the average effective tariff rate for Chinese goods will reach 33% before Trump begins his latest term.
China Tuesday revenge For U.S. tariffs, additional tariffs are up to 15% of U.S. goods and limit exports to 15 U.S. companies. These measures will come into effect on March 10.
“For Chinese companies, this will be a survival game,” Edwin Tan, general manager of Asia Tiger China, global logistics company, told CNBC.
Many business owners who sell goods to the United States have come to various social media platforms to express concerns about the increasing tariffs. Some have posted screenshots of emails from U.S. customers, demanding lower prices and not doing so, which will result in cancellation of existing orders.
Companies avoid betting because they are unable to determine the differences in tariffs from one country to another today.
Eric Martin-Neuville
Geodis Vice President, Asia Pacific and Middle East
Under last year’s U.S. presidential election, Mian Bing, owner of a fixed manufacturer based in Guangdong, received demands from key Hong Kong customers to consider building production in Southeast Asia, hoping that more tariffs will be made during Trump’s second term.
She told CNBC that the company soon afterwards purchased industrial land in Cambodia and began building a factory that will operate later this year.
When Trump raised tariffs on Chinese goods during his first presidency, many Chinese companies had already begun the so-called “China+1” Strategyexpanding procurement and manufacturing to third countries such as Vietnam, Thailand and Mexico.
Unlike the last U.S.-China trade war, Lynn Song, chief Chinese economist at Chinese companies, said Chinese companies may now postpone their relocation plans. “The last thing the company wants is to invest huge resources to move to a country, just find it is also subject to serious tariffs,” he added.
Workers produce clothing in a textile factory that supplies clothing at Shein, a fast fashion e-commerce company in Guangzhou in Guangdong province, southern China.
Jade High | AFP | Getty Images
Trump’s tariff agenda during his second term has surpassed China. His government imposes a 25% tax on Canada and Mexico and warns any country with a large trade surplus with the United States
Tan said: “According to Trump’s policy, no one knows where he will put tariffs, then added: “No country is safe at the moment. ”
Therefore, Chinese companies are looking for a third country to re-lay out supply chains with the goal of sending their goods to the United States, making the task even more difficult.
Cynthia Ding, a founding partner of Singapore-based venture capital firm SEGA Ventures, is not a typical “China+1” plan, but adopts “China+ many “strategies” but rather “China+” plan.
“This inevitably increases operating costs, but it is a necessary trade-off for supply chain security. Ultimately, these costs will be passed on to customers,” she added.
“China and many people”
In recent years, ways to mitigate the impact of U.S. tariffs have expanded production to Southeast Asian countries, mainly Singapore, Indonesia and Vietnam.
According to Rhodium Group, production in the apparel and consumer electronics sectors has shifted from China, such as the automotive and solar sectors.
Direct investment from China to Southeastern manufacturing, a episode of Southeast Asian countries almost doubled $9.2 billion in 2023,,,,, From $3.2 billion in 2017According to the Ministry of Commerce of China.
Greenfield Investment Data edited by Rhodium Group.
“Vietnam offers manufacturers a simple and practical way,” the team said on February 4, but the country is likely to be under increasing scrutiny from the White House due to our massive surplus and large investments with China.
Vietnam’s trade surplus with the United States soars about 18% each year Record high last year. This country’s Simple average tariff rate Among the most popular partners including the United States, at 9.4%, Compared with the United States, which collects 3.3%as of 2023.
Tianchen Xu, a senior economist in the Economic Intelligence sector, said other countries, such as Indonesia, the Philippines and Singapore, may see lower risks, but they are also not “immunity” to potential tariffs.
This therefore intensifies the trend that businesses diversify their businesses into multiple countries in the region.
“Companies have won the bet because they can’t determine the tariff differentiation from one country to another,” said Eric Martin-Neuville, vice president of Asia Pacific and Middle East at global logistics company Geodis.
Is it still an option for us to reset?
Some Chinese companies are considering transferring part or all of their production to the United States, hoping to avoid tariffs and enter the U.S. market directly.
A worker wearing a protective mask and gloves assembled a face mask on Wednesday, April 29, 2020 at a Hasbro manufacturing plant owned by Cartamundi, East Longmeadow, Massachusetts.
Adam Glanzman | Bloomberg | Getty Images
Bryan Zheng, founder and CEO of Guangdong-based company Livall, the company that sells smart bike helmets, said he decided to “wait and see” how the tariff action will work before making a massive Greenfield investment.
He said that despite gradually increasing the inventory prices already in the U.S., he is still considering proposing a two-year plan to transfer certain production to the U.S. that would involve purchasing parts from Chinese suppliers, but keeping the last mile of packaging and assembly work in the U.S.,
Official data from the Ministry of Commerce of China show that the United States remains the fifth largest destination for China’s foreign direct investment. By the end of 2023, US$83.7 billion has flowed to the United States.
Data shows that the manufacturing sector is China’s largest investment, accounting for 30.6% of the total amount.
Still, investment flows in sensitive technologies such as semiconductors, artificial intelligence and biotech may continue to face certain restrictions, said Cao Yuan, a partner at Beijing-based Yingke Law Firm.
– Yulia Jiang from CNBC contributed to this report.
