China escalated its trade war with the United States this week by placing additional tariffs on U.S. goods despite the increasing rate at which foreign companies are exiting the country.
Beijing announced Friday that it will resume tariffs on imported U.S. automobiles and auto parts and put a 5-10% tariff on agricultural products, whiskey and seafood. The tariff hike will affect an estimated $75 billion in U.S. exports to China and are scheduled to take effect Sept. 1.
China’s war on the American economy started long ago with intellectual property theft, high tariffs, and other unfair trade practices that past presidential administrations refused to confront. With Donald Trump in the White House, Beijing’s actions have consequences.
“Make no mistake about it, the trade war is absolutely remapping global supply chains … to the detriment of Chinese manufacturing,” Kenneth Rapoza wrote in a recent article and he’s right.
Companies have been exiting China ever since the trade war began and now many more are making plans to move.
“The reality is many companies have been thinking about leaving, anyway,” said William Reinsch, a trade expert at the Center for Strategic and International Studies. “Labor costs are going up in China, the regime is repressive, and American companies continue to suffer discrimination.”
HP, Dell and Microsoft are joining Amazon, Google, Apple and other tech giants in moving production out of China and now apparel and other consumer goods makers are joining the exodus.
The founder of Lite Gear Bags is following the lead of other manufacturers and has begun the move of a significant portion of her manufacturing to Cambodia.
“It was an incredibly difficult process,” she said. “It took them months to get up to speed. I mean, this was a factory that was making sunglass pouches and all of a sudden I’m asking them to make shoulder bags, packing cubes and backpacks.”
According to an American Chamber of Commerce poll released in May, roughly 40% of 250 surveyed firms said they were “considering or have relocated manufacturing facilities outside of China.” That’s a 25% increase from a similar poll taken in September of 2018.
It isn’t just U.S. companies moving out of China.
Supply chain auditor QIMA says that while 80% of U.S. businesses with plants in China are making plans to leave, so are 67% of European companies.
Answering Beijing’s escalation in the trade war, President Donald Trump announced Friday that his administration would respond by increasing tariffs on all Chinese exports to the United States.
“As President, I can no longer allow this to happen! In the spirit of achieving Fair Trade, we must Balance this very unfair Trading Relationship. China should not have put new Tariffs on [$]75 BILLION of United States product (politically motivated!). Starting on October 1st, the [$]250 BILLION of goods and products from China, currently being taxed at 25%, will be taxed at 30%,” Trump said. ” Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%.”
U.S. and international media have widely reported the pain the trade war is causing U.S. companies, but earlier this year more than 600 American companies signed a letter supporting the Trump administration’s tariffs and stance against Chinese unfair trade.
Over 600 companies based in the U.S. signed a letter Friday in support of the tariffs President Donald Trump slapped on China, citing a boost in American jobs and lower costs for their businesses.https://dailycaller.com/2019/06/21/over-600-us-companies-support-trumps-tariffs/
President Trump has also called on U.S. companies to leave China and threatened to use the International Emergency Economic Powers Act to increase pressure on them to do so.
“We don’t need China and, frankly, would be far better off without them,” Trump wrote Friday. “Our great companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
“…relative to Presidential powers, China, etc., try looking at the Emergency Economic Powers Act of 1977,” he added in a separate tweet.
Trump’s statements and actions should come as no surprise to American manufacturers. He has privately asked them to look at moving their operations out of China for years and some experts believe that his tweet on the Economic Powers Act may have teeth.
“The tweet isn’t entirely cheap talk,” said Derek Scissors, a China expert at the American Enterprise Institute.
The administration can continue increasing tariffs, restrict federal procurement to non-China manufactured goods, and prevent any U.S. company from moving facilities to China in the future.
As the United States, South Africa, India, Vietnam, Cambodia and Mexico take in manufacturing that used to take place in China, Beijing may soon find itself on the losing end of a trade war it caused.