Hong Kong (CNN Business)US tariffs are prompting companies to move some production out of China, but it's not going where President Donald Trump would prefer.
The trade war has made more than $250 billion of Chinese exports more expensive for Americans — from leather belts to refrigerators to motorcycles. The disruption to the world's biggest trading relationship has electronics manufacturers, industrial machinery makers and fashion brands working on shifting some of their assembly lines.
"We are flooded by inquiries," said William Ma, group managing director of Kerry Logistics, a Hong Kong-based firm that helps companies around the world manage their supply chains. "It all happens after the trade war."
Many firms are keeping much of their operations in China, which offers a giant domestic market and advantages that businesses struggle to find elsewhere. But those that are moving aren't flocking to the United States. Instead, they're looking to transfer work to other Asian countries.
n a recent survey by two American chambers of commerce in China, one third of the companies who responded said they were looking to switch to production outside of China as a result of the trade war. Only 6% said they were considering moving business back to the United States.
Asia, not America
In some industries, the tariffs have accelerated the shift of manufacturing from China to countries in Southeast Asia, where labor is cheaper.
Steve Madden (SHOO), whose handbags have been hit by a 10% tariff, says it's moving a significant chunk of its production to Cambodia and other countries. The company currently makes about 85% of its handbags in China, a figure that could drop to 50% or 60% next year.
"The shift is almost entirely due to the US-China trade conflict," Steve Madden CEO Ed Rosenfeld told CNN's Alison Kosik. "We have to prepare as though tariffs will be the new normal, but we are hopeful that cooler heads will prevail."
Consumer tech brands are also looking to Southeast Asia. Hugh Lo, vice president of the consumer division at Taiwan's New Kinpo Group, which makes electronics for clients such as Toshiba (TOSBF) and Samsung (SSNLF), says he has been inundated with inquiries from companies keen to transfer manufacturing out of China.
A year ago, his team got about one inquiry a week, he said. Now, it's "maybe 30 times more."
Lo said that TV and gaming device makers have been particularly interested in relocating. He declined to name individual companies.
Big industrial suppliers have been hit hard, too, with many of their products subject to the new tariffs.
Toshiba Machine said it's moving some of its production of molding equipment in Shanghai overseas, and machinery maker Komatsu (KMTUY) told CNN that it plans to shift some of its assembly lines to Japan or Mexico.
Source: CNN Money
Source: CNN Money
