Trump’s latest threat to slap still more tariffs in July, means that virtually ALL imports to the US will be covered.
Can companies keep manufacturing in China, ride out Storm Trump and be in the driving seat when China becomes viable again? The trade war has led to the inevitable question, can we ship goods via a 3rd party country to avoid tariffs?
Since Trump first tweeted about tariffs, Southeast Asian countries have seen substantial growth in the very same categories that would have been levied with 25% if they were Made in China.
These products may be Made-in-X, but did they come from China?
By shipping to a 3rd country, re-classifying goods as Made-in-X, under a different product heading, some companies are legally re-labelling their products to avoid the tariffs.
But manufacturers can’t simply ship to a warehouse and out again, with no investment in production. Not surprisingly ‘Laundering the Label’ won’t fool anyone, and companies hoping to avoid tariffs need to do the correct amount of value add in Country X to be considered Made-in-X.
Is this massive growth in Southeast Asia all due to Trump? It started long before Trump, when countries including China began to take advantage of the far cheaper labour rate and attractive business environment in Southeast Asia. China’s soaring wages, and now the Trump Tax, means that all of those countries that compete with China are big winners. The largest beneficiary of this extra trade is Vietnam, where business is positively booming.
Does that mean it’s game over for China? Not by a long way. Vietnam, and the other Southeast Asian countries, are not China. The formidable China workforce in 2018 topped more than 200 million people, where Vietnam has only 14.5 million. It’s not just the vast and highly skilled workforce where China wins; it’s the infrastructure too. China has honed it’s high-quality manufacturing and leading-edge infrastructure, Vietnam is a less mature prospect. You can travel in any of China’s mighty industrial hubs on an 8 lane highway, or arrive on a 350 km/hour bullet train. Contrast that with Vietnam where it’s first underground is due to open in Ho Chi Menh City in 2021.
As Vietnam’s labour pool is stretched, their wages are now increasing, land and factories cost more. Sheer volume means lack of skilled labour, bottlenecks at ports and saturation in the country’s capacity. If you are not in now, you may have missed the boat.
So, back to China, is it worth staying?
We think so. We have been manufacturing in China for almost 20 years. Our China-based team work hand in hand with our UK team. Our setup means continuity of design and manufacture, it means our commitment to completion, and it means British design with Asian economies. It means HIGHLY skilled and dedicated workforce. And it goes without saying, it means top quality.
But if you need to sell in to the US, your game may need to change. You need to be clever. Instead of looking at ‘roundabout exporting‘ and how to update the tariff heading, it’s time to change your offering.
Let design be the solution. Align your product for a new and different production line so it can be assembled with ease, quickly and with little skill. De-risk and speed up the assembly and finishing of the product, so that it can be reliably completed in the country of your choice. Take away the reliance on manpower and skills and replace it with click-together, pack-and-go. Be nimble - you can move your assembly to a country of your choice. Go truly global - set up hubs around the world, where you assemble and ship for the more local market…."Made in Your Choice".
Are Trump’s tariffs here to stay? Will he impose tariffs against Asia too? No one knows, not even Trump. Don’t gamble on what the next tweets will say, why not take control of the future of your product.