US and China Relations Further Erode

Further Erosion in Relationship Between US and China Likely

"These stupid supply chains that are all over the world, where you have a supply chain where they're made in all different parts of the world and one little piece of the world goes bad and the whole thing is messed up. I said, 'We shouldn't have supply chains. We should have them all in the United States.”

This is a quote just last Thursday by President Trump in an interview with Fox Business News. Is this just more threatening talk or does it signal something more? Could the current Administration really looking to move more manufacturing back to the US and if so what do those changes mean for businesses in the US and around the globe?

It appears quite obvious that the US and China are at odds in a number of areas and a “trade war” is often a (relatively) easy way for one country to “attack” another. With the huge amount of trade between the two countries, almost $750 billion dollars in 2019 any threat of trade actions should be taken seriously. While harsh words don’t always lead to harsh actions there is always the threat that it could happen, and companies involved in international trade need to hope for the best while planning for the worst.

Many companies had started the process in moving some of their manufacturing out of China even before the COVID19 crisis but the pandemic is likely to speed that process. While it may sound easy to start sourcing from a country other than China there are many factors that make it anything but easy. Some factors to consider include:

• If you source goods outside of China what will your total cost for those goods be, taking into account often higher transportation costs and the costs of components and materials used in the production of finished goods. While some US importers have found product sourcing from countries other than China with pricing that seems comparable to pricing from China when all the factors and costs are considered goods could end up being significantly more.

• While finished goods may be produced in countries outside of China oftentimes the raw materials or parts and components used may originate in China. Importers must exercise due diligence in determining whether the manufacturing processes completed in the supplier’s country are enough to change the country of origin to that country. Minor assembly and finishing processes may not be sufficient to effect a change in the country of origin for the goods. Rules vary by products and the actual circumstances in the process so you would should check with an experienced professional for guidance.

• While ocean cargo sailings from China are frequent leaving importers with many options sailings from other countries may be far less frequent and involve trans-shipping of the goods through multiple ports causing transit time delays. While ocean shipments from China normally reach the US West Coast in 14-17 days goods shipped from other origin countries can take weeks longer. Importers must be aware of the sailing schedules to help ensure their products arrive when needed.

It is a challenging time in international trade and we’re here to help. Just email me, Steve Fodor at info@tradelogicintl.com with your specific questions and I’ll be happy to assist.