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BEIJING – Regardless of Washington's trade deal with Beijing, President Trump has already won a major victory: companies are rethinking their confidence China.
Both sides are about to reach an agreement. Trump said Thursday that an "epic" trade pact could be envisaged in a few weeks and that he could soon meet President Xi Jinping, China's top leader. But already, pushed by tariffs and trade tensions, global companies are beginning to divert their supply chains from China, just as some officials of the Trump administration had wanted.
This movement, called decoupling, is a major goal of those who think that the world has become far too dependent on China as a manufacturing giant. As Beijing strengthens its military and extends its geopolitical influence, some officials fear that the US's dependence on Chinese factories will make it strategically vulnerable.
Now companies in several industries are reducing their exposure to China. GoPro, the maker of mobile cameras, and Universal Electronics, which makes sensors and remote controls, some works are transferred to Mexico. Hasbro is moving its toy manufacturing business to the United States, Mexico, Vietnam and India. Aten International, a Taiwanese hardware company, brought work back to Taiwan. Danfoss, a Danish conglomerate, is transferring the production of heating and hydropower equipment to the United States.
Trump's victory in this department is not unmixed. Despite his promises To bring jobs back to the United States, the bulk of the work is transferred to other countries where costs are lower. It also takes time to reshape global supply chains and China will remain a key production hub for decades to come.
Nevertheless, the leaders said that the trade war had led to a fundamental reassessment of China as the main place of production. Even Chinese companies are expanding abroad, even though the majority of their production is still in China.
"China was the factory of the world," said Song Zhiping, the Communist Party leader at China's National Building Materials Group, a giant belonging to the state. "Things are changing, which is why Chinese companies are leaving China."
A spokeswoman for the US Trade Representative's office declined to comment.
While Mr. Trump describes his trade fight as a clash for jobs, proponents of decoupling within the administration see these efforts as a way to fight a stronger and more aggressive China.
Already, China dominates the market as solar panels, and has become the world's largest producer of cars, parts and many other sophisticated products. He plans to build airliners, advanced computer chips, electric cars and other goods of the future.
Any agreement will likely put in place new US tariffs on cars, aircraft parts, nuclear plant equipment and other items that government officials deem essential for economic and environmental reasons. of security. But more generally, trade hawks hope that businesses in other industries will also find more hospitable countries in which to do business.
China has become a manufacturing engine over the last two decades. The workforce was inexpensive and relatively skilled. The Communist Party has prevented the emergence of independent unions. Subcontractors were legion, which meant that companies could heavily negotiate reduced supply costs. China has built an extensive network of highways and railway lines. Local customers are large and growing, which means that businesses do not have to go far to sell their products.
Companies flocked to it. According to the United Nations Industrial Development Organization, China accounted for one-quarter of global manufacturing output in value terms last year, up from 8 percent in 2000.
The value created in China by the manufacturing sector last year was higher than that of the United States, Germany and South Korea combined.
The prospect of more trade struggles only adds to the reasons for diversification, which also include threats elsewhere, as Trump does. threatens to close the border with Mexico and the troubled exit of Britain from the European Union.
"Localization will matter more," said Joe Kaeser, managing director of Siemens, one of Germany's largest conglomerates, late in an interview. last month on the sidelines of the China Development Forum in Beijing. "You are more resilient to political discussions."
China may not necessarily oppose some of the decoupling efforts. Beijing has long hoped to eliminate low-skilled and polluting manufacturing jobs and move higher up the value chain.
"The size of the labor force is shrinking, the cost of labor is increasing and we are losing our competitive edge in low-cost industries," said Miao Wei, China's Minister of Industry and Industry. Information Technology, at the China Development Forum. He added that the country would focus instead on innovative high-tech industries.
Nevertheless, Chinese officials must walk on a fine line. With the slowdown in the country's economy, a sudden shift of work out of China could lead to job losses and instability.
Decoupling efforts seem to be in their infancy. A large UBS survey of CFOs of Chinese export-oriented manufacturers late last year revealed that a third party had relocated at least a portion of Chinese production in 2018. Another third was planning to to do it this year. UBS found that the typical company was transferring production of about 30% of its exports.
Businesses now want less reliance on a single location, which involves seeking an alternative to China, said Bill Winters, chief executive of Standard Chartered Bank, at the World Economic Forum in Davos, Switzerland, this year.
"People who are worried about the possibility of higher tariffs on Chinese exports, for example, are looking to transfer their export facilities from China to other countries, including Chinese companies. "said Mr. Winters.
Countries seeking to replace China began to emphasize that their countries' exports were less likely to be subject to tariffs.
In an interview in Davos, Airlangga Hartarto, Indonesian Minister of Industry, said in an interview with companies operating in China "that the trade war between the United States and China creates new uncertainty".
The ability to diversify depends on the sector. Some auto parts companies run their US factories every day over hours to avoid tariffs on products made in China, said Razat Gaurav, general manager of LLamasoft, a supply chain management company located in Ann Arbor, Mich.
On the other hand, he added, smartphone and smartphone manufacturers – who have not generally been affected by Trump's tariffs – have found few places to move, as China dominates this supply chain. Nevertheless, some players in this sector are also changing, such as the closure of a smart phone factory in Beijing by Sony last month, after the increase in production in Thailand.
For now, companies are looking for alternatives. Steve Madden, the shoe company, is displacement of production in Cambodia. Hasbro, the world 's largest canvas manufacturer, has set a goal, by the end of next year, "to be 60% out of China", by transferring production to the US and elsewhere, said Brian Goldner, president and CEO of the company recently. conference call.
Although a lot of the work leaving China is going to other low-cost countries, some companies are following Mr. Trump's suggestion to transfer their production to the United States.
Danfoss, a Danish manufacturer of heating and cooling systems, as well as sensors and transmitters, has seen rising costs in China, particularly for skilled workers, said Kim Fausing, general manager of the society. It is also looking for ways to reduce the world's greenhouse gas emissions from transportation.
When Danfoss bought a US heating system company a year ago and discovered that the company had recently moved from China to China, it acted quickly. "The first thing we did after the acquisition of this software was to bring everything back to the United States, where Danfoss already had a dozen factories," said Fausing.
The first round of 25% tariffs introduced by Trump last July included Danfoss' long-running hydraulic parts in northeastern China. The company has also transferred the production of these parts to the United States.
"There is not much difference between the costs in China and the United States," Fausing said. "You must have a very good record today to justify producing something in China and sending it to the United States"
Ana Swanson contributed to Washington, D.C.
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