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US manufacturers are shifting their production to countries other than China, while trade tensions between the world's two largest economies have been prolonged for a second year.
Furniture manufacturer
LoveSac
Co.
makes about 60% of its furniture in China, compared to 75% at the beginning of the year. "We have moved our production to Vietnam very aggressively," said Shawn Nelson, general manager of Stamford, Connecticut. Mr Nelson said that he would not consider any production in China by the end of next year.
The actions taken by US companies are resulting in a reorganization of global supply chains in the manufacturing sector as they prepare for a long period of unequal trade relations. Business executives relocating outside of China said they would like to keep them for the time and money invested in setting up new facilities and changing shipping terms. Businesses said the changes accelerated after tariffs on many Chinese imports rose from 10 percent in May to 25 percent.
"Once you move, you do not come back," Nelson said.
Yeti Holdings
Inc.
announced plans to transfer most of its chillers from China by the end of this year.
I robot
Corp.
also announced the production of Roombas in Malaysia this year.
Crocs
Inc.
said that he expected that less than 10% of products destined for the United States would be made in China by 30%, compared with 30% in June. And manufacturer of diesel engines
Cummins
Inc.
stated that it avoided $ 50 million in tariff expenditures by transferring part of its production to the United Kingdom and other countries.
According to the US Census Bureau, imports from China fell 12% in May from the previous year, the largest decline since the financial crisis a decade ago.
The main beneficiaries of this decline were other Asian countries where production costs are low, such as Vietnam, India, Taiwan and Malaysia. Many of these countries have experienced a sharp increase in their exports, although allegations that some of this additional traffic is attributable to products made in China and routed through these countries without significantly modifying them to avoid customs.
US imports from Vietnam are expected to reach $ 64.8 billion this year, up 36 percent from 2018, according to consulting firm A.T. Kearney.
"We are moving production to other parts of the world," said Marvin Edwards, chief executive of CommScope Holding Co., in June. Hickory, North Carolina, manufactures antennas for sale in the United States at its factory in India instead of China.
However, there is little evidence that US manufacturers are bringing China's production back to the United States, a decision the Trump administration hoped the tariffs would encourage.
While imports from other Asian countries rose, manufacturing output in the United States declined 1.5% in May from a recent peak in December, according to the Federal Reserve. The Institute for Supply Management said earlier this month that its manufacturing index fell again in June, reaching its lowest level since 2016.
"If we were trying to build a factory in the United States, it would be extremely expensive," said John Hoge, co-owner of Sea Eagle Boats Inc., which contracts 85% of its kayaks, canoes and inflatable boats. manufacturers in China. Hoge said the network of manufacturers and suppliers in China that makes boats for Sea Eagle and many competitors is not as complete in any other country.
"It took us 20 years to develop the supply chain in China," he said. Mr. Hoge estimated that the 25% duty on his products that came into effect in May would double the cost of the company from Port Jefferson, NY, to about $ 500,000 a year.
Crown Crafts
Inc.
analyzed manufacturing costs in half a dozen countries before deciding to continue manufacturing baby blankets in China, despite tariff costs.
Share your thoughts
Do you think that the current trade dispute between the United States and China will bring about lasting changes in the global supply chain? Why or why not? Join the conversation below.
"It's very hard to find a country that can compete with China," Randall Chestnut, chief executive of the Louisiana firm, told analysts in June.
More than 100 companies have asked the Commerce Department to waive the latest 25% tariff on their imports because they claimed they could not find suppliers outside of China.
One is
Zoom Telephony
Inc.
who claimed to have lost $ 1.1 million in the first quarter and probably more in the second quarter because of tariffs on cable television modems imported from China and sold
Amazon.com
Inc.
Best buy
and other retailers.
"I do not think anyone manufactures them in the United States," said Frank Manning, general manager of the Boston-based company, in an interview. "We are bleeding."
Write to Austen Hufford at [email protected] and Bob Tita at [email protected]
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