Politico is out with a piece that shows how American and Chinese companies won’t just sit still and let Donald Trump’s Tariff’s put them out business….
They are maneuvering AROUND Trump’s tariff increases, like water seeking a venue no matter how one tries to stop it, and seeking OTHER places to make their products, like , of all places?….Vietnam….
Companies with thousands of factories in China are now racing to relocate out of the mainland, which seemed the only practical solution to avoid losses from higher tariffs that could take effect in a little more than a month. Earlier this week, Trump said it was “highly unlikely” that he would hold off on increasing the tariffs.
Executives of all types of companies are weighing what to do if the trade standoff lasts long. A recent survey by business consulting firm Ernst and Young found that more than half believe tariffs will remain in place until 2020 or later. About 84 percent are reviewing their supply chains, and 51 percent said they have already made changes.
In Asia, dozens of intermediary firms seeking commissions are more than eager to help manufacturers find real estate, employees and permits to move to Vietnam.
Zhang Diansheng of Hang Sinh Business Service Center in Ho Chi Minh City said his team has guided more than 80 manufacturers to various industrial parks since September, when the latest round of U.S. tariffs took effect, though only eight have so far applied for licenses to do business there. Still, the increased interest is already inflating land costs and exposing a shortage of skilled labor in the Southeast Asian nation.
Schewel Furniture, a fifth-generation family business, employs 700 people and operates 50 stores in Virginia, West Virginia and North Carolina, primarily in smaller towns and cities. The company’s customers have an annual median household income of about $35,000 to $40,000, so even a small price increase can turn away buyers.
“We don’t really have the capacity as a family-owned company to do economic analysis and modeling in terms what are we going to have to do to respond to this,” said Matt Schewel, director of store operations for Schewel Furniture Company, based in Lynchburg, Va. “We’ll probably raise prices and continue with our current suppliers while looking for other options.”
Two of the retailer’s top four best-selling upholstered furniture products are being hurt by the tariffs, Schewel said. A 25 percent tariff would add about $150 to the cost of its best-selling recliner sofa, which now sells for $750.
Schewel, who had been a reporter covering trade policy in Washington before joining his family’s operations, is preparing as best he can for an escalation in the tariffs, but it’s made buying decisions more difficult.
At last month’s furniture market in High Point, N.C., a major industry show that occurs twice a year, he said the store’s trusted supplier for leather furniture was quoting three different prices — dependent on how the tariff situation shakes out.
Schewel said his company is considering three options, each of which presents challenges: keep buying Chinese-made furniture and pass the extra costs on to the consumer, which is likely to result in lost sales; try to buy more product from Southeast Asian countries, where capacity or quality is not assured; or buy more U.S.-assembled products, which may be too expensive for the store’s core customers.
For now, the plan is to import as much inventory as possible before a potential tariff escalation, Schewel said.
“This is who Trump is. This is his negotiating strategy,” he said. “Some [retailers] are optimistic it’s going to work. I am not.”
One thing for sure?
Donald Trump IS in the process of trying to hurt the Chinese economy….