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US Company Reactions to China Tariffs – Pt. 1

Companies are staying in China despite the increased tariffs.  News regarding the USA’s China tariffs and trade talks alternate between dismal and hopeful depending upon the source you read.  One interesting fact is that some major companies are supposedly relocating some of their manufacturing in Vietnam.  However, the pricing coming out of Vietnam, due in a large part to Vietnam’s new “star” status, is turning out to not be the bargain everyone was hoping for.

US companies and increasingly, the US consumer are both in the beginning adjustment period as a direct result of the tariffs. There’s a lot of negotiating going on. Hence, most companies are looking anywhere and everywhere for a quarter percent reduction in an attempt to mitigate the increasing cost of doing business with China.  Interestingly, there are many accounts that companies are feeling the burden of the tariffs. Consequently, they’re adjusting as best they can to these new conditions, and moving on as usual.  Most companies do not foresee moving out of China in the next two years. Less than 15% reported in a recent AmCham (American Chamber of Commerce in Beijing) survey that they have plans to relocate manufacturing operations in the medium term.

Why are Companies Choosing to Remain in China?

There are various reasons why a company will want to keep doing business in China. Ultimately, some companies would rather seek a workable solution under the new conditions than move operations to another country.

The top four reasons are:

1. Strong Historical Business Relationships

Strong relationships and partnerships have formed between these US and China companies over the past years. These relationships help American companies mitigate the tariff increases reducing the incentive to move production to another country.

2. The Win-Win Business Model

American companies and their Chinese manufacturers are adopting more of a “win-win” business model that works for both parties. Many American businesses can ask for and receive slight reductions along their supply chain so that everyone benefits and the supply chain can remain uninterrupted.  American companies continue to work with their Chinese makers to make adjustments aimed at alleviating the burdens of the tariffs.

3. Affordability for Consumers

While additional China tariffs will increase the cost per unit, the products ultimately remain affordable for consumers. By continuing to manufacture in China companies try to find new efficiencies and limit the impacts so that Chinese manufacturing remains a cost-effective option.

4. Manufacturing Quality

Companies that are offshoring their manufacturing to China remain pleased with the quality of the products they receive. This is due to long-standing relationships that have developed into the best methods, materials, and quality standards over the years.

Staying in China with ITI Manufacturing

ITI Manufacturing is an experienced Chinese manufacturing liaison company that has been working with US-based manufacturers since 1974. Our goal is to ensure your company takes advantage of our knowledge of the tools and the know-how to have products as well as components and assemblies successfully manufactured in Asia. Since our founding, ITI has been fortunate to develop strong and lasting relationships with thousands of China’s top manufacturers. It is through these relationships and our “on-the-ground” and China-based, multi-lingual professional staff that US companies can directly benefit.

The choice to continue manufacturing operations in China requires expert advice to navigate the ins and outs of current and changing economic conditions. We are here for you with options to help you decide your next move.

To find successful outcomes for your offshore manufacturing needs contact ITI today and let us guide you through these times. You can call us now, toll-free, and speak with an expert at 888-574-6823.

By |2019-08-13T22:48:01-05:00July 2nd, 2019|China Economy & Industry News|

About the Author:

Avatar for Mike Stewart
Mike Stewart joined ITI in 2002 and is Vice President of Business Development. He has a BA in Business and Journalism from SFA University. Before joining ITI Mike sold, installed, and trained businesses in comprehensive business computer systems in the medical and automotive industries and served as Executive Vice President of a video news magazine production company.