Diversify the Chinese supply chain, which was challenged by the Trump tariff

Many companies were steadily underestimating their dependence on China as a manufacturing center since President Donald Trump’s first term, in the hope that the impact of punitive fees from the United States would be knocked. Then the latest “mutual” definitions came.

Trump’s move to impose customs tariffs on goods on a broader group of countries now puts these diversification plans in a state of chaos and let companies scramble to determine where and how their goods are produced.

Steve Grensbon, CEO of Honey-Can-Do International, who is based in the Illinois-based, has started transferring more of his production from China to Vietnam during Trump’s first presidential term. The company provides home appliances such as shelves units, coating lifts and washing dates to American retail giants like Wal Martand goal and Amazon.

The company relied on Chinese suppliers of up to 70 % of its products before Trump’s first state. This session has been decreased since then to less than a third because Vietnam and Taiwan have become of increasing importance as sources of sources.

Greenssbon said that the news of the high definitions on Taiwan and Vietnam stings, given the large investments made.

“It is a crushing matter for our company. It is disappointing. It is sad. It is frustrating,” Grensbon said.

“As a US -based company, this is incredibly painful that our government does this for us,” he said, noting that the transfer of production to the United States is not an option, due to the high costs of employment and the absence of the required infrastructure.

He said that the definitions will only force companies to impose higher prices than consumers, which makes the prices of these products less competitive in the end.

Trump’s trade war with China in His first term The strategy of “China is one plus”, which has witnessed many manufacturers turning part of its production away from China into other Asian countries with low employment costs and moderate tariff risks from the United States

But after Trump announced a much broader tariff system – including 10 % basic tariffs on all countries and much high tariff rates on some Asian economies – you may have to “China in addition to one” to reassess their options.

“China in addition to one” has been strongly undermined through the Trump tariff that now included every American trading partner, “Ezohir Brasad, Professor of International Trade and Economics at Cornell University, told CNBC.

He added: “The feasibility of reproduction and restructuring of supply chains through countries such as Vietnam and India, which with the United States had more constructive trade relations, was shattered through the last round of definitions.”

India and Vietnam were major beneficiaries in this shift away from China, especially in Electronics for clothes and consumption. For example, the American Tech Giant Apple Produce more Products in both countries.

Imports from India, Vietnam and Taiwan are now hitting With additional fees with a total of 26 %, 46 % and 32 %, respectively. A 104 % punitive tariff handed over to China on Wednesday.

According to Prasad, the high level of definitions imposed on American imports from China means that there is still an advantage in directing supply chains across countries under relatively low definitions.

“However, the entire logic that supports global supply chains as a way to reduce costs and improve efficiency has been analyzed through definitions,” he said, adding that it will significantly add the costs of maintaining “lean and medium supply chains” that cross the national borders, and often end several times.

Economists and the supply chain note that the sincerity of Trump’s tariff rates is still uncertain, as many expect to reduce them based on negotiations between the Trump administration and individual countries.

The Futurum Group, the CEO and the chief analyst of the technology -focused research company, told CNBC that the customs tariff will remain in its current form, and while it is expected that “fair commercial deals” will be issued with commercial partners such as Vietnam and India, the Chinese result and the United States are much lower.

There were signs of that Vietnam and India It intends to bargain with Trump on commercial conditions. However, the uncertainty surrounding these negotiations is a dilemma for companies.

“I have spoken to a few CEOs and business leaders who have talked about their solutions over the past decades that are likely to be a problem and the current uncertainty, which makes almost impossible to build adequate reduction plans at any time on the horizon really.”

According to Taymanan, companies affected by very profitable definitions will work with their supply chain teams to determine the appropriate mitigation strategy. However, “if the definitions are committed to their current form, some Chinese investments in addition to one investment may have been easy.”

According to the Trump administration, definitions are part of a plan to make a tremendous return to American industrialization. Some experts told CNBC that a certain amount of cold and investment in the United States is likely to happen in certain industries.

“In the face of an uncertain and very volatile scene of definitions and other commercial restrictions, companies are likely to emphasize steadfastness instead of the efficiency of supply chains,” said Brasad.

“This may mean a greater degree of reproduction of production (to the United States) in addition to the nomination of friends for countries that are seen at least as geopolitical allies in the United States,” Brasad added.

However, the transfer of production can be a long -term capital for many supply chains, especially those in high -tech industries.

For example, the Apple Foxconn partner took several years to start producing advanced iPhone devices in India, and factories It is said He faced many conflicts.

“Investments in factories that were made once easily or immediately … it will be not possible to transfer these factories to another destination for several years,” said Arthur Dong, a professor of strategy and economics at Georgetown University.

In addition, based on the industry, companies are restricted by various factors when considering transformations in supply chains, such as the availability of display inputs, infrastructure, quality and cost of local workers, organization and governance.

Dong said that such factors leave companies with a difficult decision, adding that some may choose to ride the storm on supply chains for three to four years from Trump, in the hope of making a change in American policy in the upcoming medium renewal elections.