Trade War Casualties: Factories Shifting Out Of China

Trade War Casualties: Factories Shifting Out Of China

Jul 30, 2018

By Kenneth Rapoza, Contributor, Forbes Supply chains starting to shift at a faster pace as companies look to avoid tariffs.  China-based manufacturers were already in the process of moving to lower-cost Southeast Asia. Now that trade tariffs have been enacted on at least $50 billion worth of goods, and another $200 billion likely by summer’s end, they are shifting their supply chain. It’s happening. “With recent tariff battles, companies aren’t as eager to have production in China,” says Nathan Resnick, CEO of startup company Sourcify. The business-to-business manufacturing platform has offices in San Diego and Guangzhou. “We run production runs in India, Bangladesh, Vietnam, Philippines, and Mexico right now. Labor costs are actually more affordable outside of China, so for products like apparel where there is a lot of cut-and-sew labor, most companies are moving out of China anyway,” he says. Sourcify raised $2.5 million through Y Combinator this winter. “I’ve been going back and forth to China for years, and it is getting more expensive. With all these tariffs coming, why not run some of your production runs elsewhere? Companies are saying that the scare of these tariffs has decreased the incentives to manufacture in China.” Sourcify is small, but Kerry Logistics Network, a Hong Kong-listed firm owned by Malaysia’s billionaire Kuok family, is not. The South China Morning Post reported that Kerry shifted part of its production lines from mainland China to its corporate home further south in order to avoid tariffs. “Our clients have been shifting part of their production lines as early as March from China to other Asian countries where they already have manufacturing plants,” William Ma Wing-kai, Kerry’s managing director, was quoted saying in the Hong Kong daily. “This is a reallocation of global production bases,” Ma said. For the last couple of years, China has been moving to a more automated assembly line, pushing lower-cost manufacturing to Vietnam and elsewhere. China is now one of the world’s largest producers of robotics used in manufacturing assembly lines. As the country moves up the value chain, old-school labor like stitch-and-sew apparel manufacturing is leaving the country. Now that the tariffs are in place, with more promised, companies that were...

Other Voices: Is the time right for reshoring?

Other Voices: Is the time right for reshoring?

Jul 16, 2018

By Harry Moser, Modern Materials Handling New research -as well as incentives like lower corporate tax rates – suggest that it is. It’s hard not to pick up a newspaper or listen to a news report without hearing that U.S. manufacturers are reshoring production, and jobs, back to the U.S. It’s a cause we have been dedicated to at the Reshoring Initiative. There are a number of reasons why we believe that 2018 is the right for companies to re-evaluate their offshoring decisions. Among them are the reduction in U.S. corporate tax rates and regulatory costs and the approximately nine percent decline in the USD from Jan. 2017 to Jan. 2018. Recent academic research provides useful detailed insight into how and why some organizations have reevaluated their offshoring decisions, leading to decisions to reshore. The results are generally consistent with the analyses of data collected by my organization, the Reshoring Initiative, based on a larger population of reshorers. In a recent article entitled “Why in the world did they reshore? Examining small to medium-sized manufacturer decisions,” John V. Gray, Gökçe Esenduran, M. Johnny Rungtusanatham, and Keith Skowronski looked at four small-to-medium-size enterprises, or SMEs, with headquarters and demand in the U.S., that had moved their manufacturing operations from low-cost locations in Asia back to high-cost countries. Two of the companies are located in the Midwest and two are in the West, with product categories ranging from power transmission equipment to measuring and controlling devices, to fabricated metal products to apparel. The authors found that these reshoring decisions are driven by factors beyond changing location-related costs. The Reshoring Initiative and John V. Gray, one of the co-authors and a professor at The Ohio State University’s Fisher College of Business, have discussed the reshoring phenomenon for years. This article is an effort to compare the results from the in-depth academic research of a small number of firms by Gray and his colleagues, and the larger-scale survey data collected by our organization. To differentiate between their work and ours, any numerical results related to the work of the Reshoring Initiative are italicized. Lessons Learned 1. Remedying the Unintended Consequences  SMEs are correcting the unintended consequences of initial offshoring decisions...

171,000 Jobs Come Home to USA in 2017

171,000 Jobs Come Home to USA in 2017

Jun 4, 2018

By Frank Spotorno with Dan Murphy, Yonkers Times A recent report by our friends at The Reshoring Initiative (reshorenow.org) found that last year, 2017, the USA saw an increase in manufacturing jobs coming back to this country, or reshoring, at a record pace: 171,000 jobs have returned as a result of reshoring or foreign investment. American companies are shifting their production of goods from outside the U.S. and bringing their jobs home. While the 171,000 jobs that returned last year is significant, projected figures from this year show that the trend toward making it in the USA is continuing. While some of the reasons for the return of manufacturing jobs to the USA can be attributed to President Donald Trump and his “Buy American, Hire American” initiative, other factors that add to the bottom line of U.S. companies include proximity to customers, government incentives, and the value of “Made in the USA” branding. Harry Mosher, president of the Reshoring Initiative, said that more jobs will continue to come back to the USA. “With 3 million to 4 million manufacturing jobs still offshore, as measured by our $500 billion-per-year trade deficit, there is potential for much more growth,” he said. “We call on the administration and Congress to enact policy changes to make the United States competitive again.” Mosher added that a strong dollar and a stronger skilled U.S. workforce helps continue the wave of jobs coming back home. The Reshoring Initiative has been calculating the cost of doing business for American companies overseas, and comparing it to making it in the USA for more than a decade. Every year the cost of building goods and products in China, in comparison to the USA, has narrowed and is now at the point where it makes real business sense to return manufacturing plants back to America. “We know where the imports are by country, and we know the price difference between the foreign price and the U.S price,” said Mosher. “The total cost of foreign-made goods delivered to the U.S. is a full 95 percent of the cost of U.S.-produced goods. We know how much you have to shift it to make the U.S. competitive with China.”...

China really is to blame for millions of lost U.S. …

China really is to blame for millions of lost U.S. …

May 15, 2018

“China really is to blame for millions of lost U.S. manufacturing jobs, new study finds” By Jeffry Bartash, MarketWatch Millions of Americans who lost manufacturing jobs during the 2000s have long ”known” China was to blame, not robots. And many helped elect Donald Trump as president because of his insistence that China was at fault. Evidently many academics who’ve studied the issue are finally drawing the same conclusion. For years economists have viewed the increased role of automation in the computer age as the chief culprit for some 6 million lost jobs from 1999 to 2010 — one-third of all U.S. manufacturing employment. Firms adopted new technologies to boost production, the thinking goes, and put workers out of the job in the process. Plants could make more stuff with fewer people. In the past several years fresh thinking by economists such as David Autor of MIT has challenged that view. The latest research to poke holes in the theory of automation-is-to-blame is from Susan Houseman of the Upjohn Institute. Academic research tends to be dry and complicated, but Houseman’s findings boil down to this: The government for decades has vastly overestimated the growth of productivity in the American manufacturing sector. It’s been growing no faster, really, than the rest of the economy. What that means is, the adoption of technology is not the chief reason why millions of working-class Americans lost their jobs in a vast region stretching from the mouth of the Mississippi river to the shores of the Great Lakes. Nor was it inevitable. Autor and now Houseman contend the introduction of China into the global trading system is root cause of the job losses. Put another way, President Bill Clinton and political leaders who succeeded him accepted the risk that the U.S. would suffer short-term economic harm from opening the U.S. to Chinese exports in hopes of long-run gains of a more stable China. No longer needing to worry about U.S. tariffs, the Chinese took full advantage. Low Chinese wages and a cheap Chinese currency CNYUSD, -0.6037%   — at a time when the dollar DXY, +0.48%  was strong — gave China several huge advantages. Companies shuttered operations in the U.S., moved to China and eventually set up...

U.S. Delays Decision On Tariffs For EU…

U.S. Delays Decision On Tariffs For EU…

May 1, 2018

“U.S. Delays Decision On Tariffs For EU, Prolonging Uncertainty” By Christopher Rugaber & Ken Thomas, AP Writers Featured on Manufacturing Business Technology WASHINGTON (AP) — The U.S. government will take another 30 days to decide whether to impose tariffs on imports of steel and aluminum from the European Union, Canada and Mexico, extending a period of uncertainty for businesses in those regions. The delay helps the U.S. avoid a potential trade war with allies as it prepares for tense trade talks in China this week. But the EU slammed the decision as bad for business that “prolongs market uncertainty, which is already affecting business decisions.” “As a longstanding partner and friend of the U.S., we will not negotiate under threat,” the EU said in a statement Tuesday. The Trump administration said Monday it had reached an agreement with South Korea on steel imports following discussions on a revised trade agreement. And the administration said it had also reached agreements in principle with Argentina, Australia and Brazil on steel and aluminum that will be finalized shortly. “In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment and protect the national security,” the White House said. Facing a self-imposed deadline, President Donald Trump was considering whether to permanently exempt the EU and Mexico, Canada, Australia, Argentina and Brazil from tariffs of 25 percent on imported steel and 10 percent on imported aluminum that his administration imposed in March. The White House had given itself until the end of Monday to decide whether to extend the exemptions. The EU has taken a tough stance, raising the prospect of a trade war if the U.S. does not back down. It has a list of retaliatory tariffs worth about $3.5 billion on imports from the U.S. that it will activate if the EU loses its exemption. Germany said it continues to expect a permanent exemption. The EU’s largest steel exporter to the U.S., it accounted for about 5 percent of U.S. steel imports last year. “Neither the EU nor the U.S. can have an interest in an escalation of their trade tensions,” a spokeswoman for Chancellor Angela Merkel said Tuesday in a...