With China as the world’s leading consumer and manufacturing superpower, looking elsewhere is easier said than done. Data produced by the World Bank indicates that China, as the world’s leading manufacturing hub, outperforms the output of the United States and Japan – its nearest competitors –combined.
The escalating rhetoric shows no sign of cooling and comes on top of a long-term trend of cost increases in China; accordingly, some brands are looking elsewhere for a better deal – with Cambodia, Vietnam and Bangladesh picking up business.
And a new report by The New York Times says that companies such as Steve Madden, the footwear brand, and Puma, the German sportswear brand, have said they will look to move their manufacturing away from China. Both brands have a significant presence in the United States market.
China’s superior transport and shipping infrastructure, as well as the availability of key suppliers in every category from clothing, to mobile phones, to electronic components means that the choice to move manufacturing to a company such as Cambodia – where labour is cheaper, but niche suppliers and transport infrastructure are poor – is not an easy one for brands.
“People are desperate to get out of China,” said Spencer Fung of Li & Fung, who works with Western companies and factories in emerging markets, in comments to The New York Times.
According to a spokesperson for Inventec, a Taiwanese manufacturer of laptops and electronics for brands including HP, Toshiba and Acer, the company has built a contingency plan to move parts of its China production to other countries including Mexico, the US and the Czech Republic.
The US consumer electronics industry is similarly concerned: “Today’s retaliatory tariffs are not an effective trade policy and may violate US law,” said Gary Shapiro, chief executive of the Consumer Technology Association, in a media statement in response to President Trump’s announcement of a further $200bn in tariffs to go into effect this week. Consumer electronics parts are especially affected.
“We urge the administration to reconsider its misguided approach of increasing tariffs, as they are directly paid for by American companies and consumers,” he added.
Meanwhile, China has said it cannot proceed with trade talks while the US is “holding a knife to someone’s throat”, according to the Chinese-language edition of state paper Global Times.
Sourced from The World Bank, New York Times, Consumer Technology Association; additional content by WARC staff