Panelists: Sally Peng, Partner, APAC Practice Leader, Sandler, Travis & Rosenberg Alicia Garcia-Herrero, Chief Economist - Asia Pacific, NATIXIS Robert Grieves, Chairman, American Chamber of Commerce in Hong Kong Holly Smith, Consultant, US-China Relations and Policy
Moderator: Finbarr Bermingham, Production Editor, Political Economy, South China Morning Post
“The damage has been done; but the world is bigger than China” To kick-off the day, the QIMA Conference gathered representatives from the American Chamber of Commerce, Sandler, Travis & Rosenberg, Natixis and a consultant specializing in US-China trade policy. The conversation focused on the far-reaching consequences of the uncertainty surrounding tariffs. As many businesses move away from China, the global sourcing landscape as we know it is being reshaped.
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Key takeaways:
Where do businesses stand right now in terms of sourcing from China?
In many ways, the trade war continues to affect the day-to-day life of businesses, but on the executive level, companies with long supply chains have already made the key decisions on whether and where to move their sourcing.
The damage has been done: even if a truce is reached in the tariff stand-off, the trade policies between the US and China have already made a number of structural changes to global trade, and businesses that buy from China will continue their move to different geographies.
How are businesses navigating the tariffs?
Moving out of China is not always a viable option. For newer sourcing regions, it is all but impossible to replicate the high levels of infrastructure and training that Chinese manufacturers had developed over the last decade.
Some companies resort to creative solutions for side-stepping tariffs: such as using different cost calculation methodologies, product re-classification, and moving only the last stage of manufacturing to a different country.
How are individual industries coping?
When it comes to navigating the trade war, some industries, such as apparel and footwear, are ahead of the pack, as they have been moving out of China for over ten years now due to the increase in labor costs. As a result, for many major players, the remaining share of China sourcing is directed for China’s domestic market and therefore not affected by the tariffs.
Meanwhile, in the electronics sector, Chinese companies that outsource production abroad make sure to emphasize that their goods were made in Vietnam, Taiwan, etc. – as buyers are gravitating towards products made outside of China.
The bigger picture and a look at the future:
The nature of global trade involving China has been changing since long before the US-trade war, with a key factor being is the increased vertical integration within China and the size of its market.
Further regionalization is in store for the global supply chain, but the division is more likely to be along political, not geographical boundaries.