To date, the U.S. has imposed tariffs on $550 billion in Chinese imports. In retaliation, China set tariffs on $185 billion worth of U.S. goods. As a result, trade tensions between the two countries have erupted into a full-blown trade war.
Initial reactions to the tariffs were tepid and dispersed, but now we’re seeing more companies moving operations out of China in order to escape the added tariff and supply chain costs. Particularly prone to these increases, technology companies appear to be leading the charge.
Some of the earliest moves included Google’s shift of significant portions of its U.S.-bound motherboard production from China to Taiwan and Malaysia, averting the 25% tariffs that would apply on printed circuit board assembly, China Briefing reports.
Contract-based technology manufacturers Quanta Computer, Foxconn Technology, and Inventec have also migrated parts of their production to Taiwan, Mexico, and the Czech Republic, the publication notes.
In August, HP Inc.-laptop maker Inventec Corp., said it would shift production of notebooks for the U.S. market out of China within months, Bloomberg reports. The company wants to move its entire American-bound laptop operation to its home base of Taiwan within two to three months. The company assembles Apple Inc.’s AirPods and produces notebook computers for HP.
More recently, Zebra Technologies announced that it was pulling its supply chains out of China ahead of the scheduled Dec. 15 tariffs. The electronics maker has already done so for products that were hit by earlier tariffs, CNBC reports. Zebra makes barcode scanners, printers, and other mobile computing products for businesses.
In October, Fitbit said it would pull nearly all of its device manufacturing out of China due to the U.S. tariffs. This move makes the company the first major tech firm to publicly announce that it’s shifting fully away from China.
“Many tech companies have had to confront the challenges of making their goods in China as the US-China trade war drags on, especially with a new round of tariffs set to go into effect in December that cover consumer goods previously spared from import taxes,” CNN’s Clare Duffy writes in “Fitbit is pulling manufacturing out of China to avoid tariffs”. “The looming tariffs are forcing companies with manufacturing operations in China to either pass the costs on to consumers or absorb them,” Duffy adds.
Not Coming Home
According to Bloomberg, Microsoft Corp., Amazon.com Inc., Sony Corp. and Nintendo Co. are all weighing their options away from the line of fire, such as Southeast Asia and India. For now at least, the consensus is that these companies aren’t reshoring—or, bringing back to the U.S.—their manufacturing operations.
In “Tech manufacturing is moving out of China, but it’s not coming to the U.S.”, Jonathan Terrasi singles out Vietnam and India as two potential targets for firms looking to reposition their manufacturing activities. The former is in close proximity to China and shares it low cost of living (which would translate into low wages) while the latter is a close U.S. ally.
The transition will take time. “Vietnam offers cheap labor, but its 100-million population is small compared with China’s 1.3 billion, and its roads and ports are already clogged,” WSJ’s Niharika Mandhana writes. “India has the manpower, but skill levels fall short and government rules are relatively restrictive.”