Chinese Companies Move Production To Mexico To Avoid Tariffs

At a time when Donald Trump’s America imposes punitive tariffs on “made in China,” Chinese companies are relocating their production from Vietnam to Mexico to escape the effects of the trade war.

Exasperated by its abysmal deficit with the Asian giant, Washington has imposed between July and August a 25% duty on goods imported from China worth $ 50 billion a year and is preparing to tax $ 200 billion dollars. additional property.

The only way out for many Chinese firms is to assemble their products elsewhere. Manufacturers of tires, plastics or textiles have already begun this relocation, according to commercial statements consulted by AFP.

Some examples

HL Corp, a producer of bicycle spare parts, announced last month the move of a factory in Vietnam.

This site will “reduce and avoid” the impact of US tariffs, the group said, noting that the Trump administration specifically targeted Chinese electric bicycles in August.

“US fees inevitably lead companies to adjust their supply chains, if they become overnight 25% less competitive,” observes Christopher Rogers of Panjiva commercial news agency.

The trend is not new: faced with rising local labor costs and tightening environmental regulations, the Chinese industry is already trying to relocate part of its production, particularly in Southeast Asia.

“China-US trade tensions are accelerating the trend” and this exodus “feeds unemployment problems” in China itself, said Cui Fan, research director of the China Society of WTO Studies, a government-affiliated think tank.

Manufacturers Hasbro (toys), Olympus (cameras) or Deckers (shoes), among many other multinationals, have already relocated out of China production lines. But Chinese firms are now following suit.

Hailide New Material, which manufactures industrial yarns in Zhejiang, exports most of its production to the United States and other countries.

“Right now, we produce everything in China. To better escape the risks of anti-dumping and tariff increases, we decided after a long review to install a factory in Vietnam, “said group leaders last month to shareholders.

This is an investment valued at $ 155 million, which should increase the company’s production by 50%. The Vietnamese plant is supposed to take over “the offer to the United States”.

Examples abound: a textile specialist settling in Burma, a mattress manufacturer inaugurating workshops in Thailand, an engine manufacturer buying a plant in Mexico, according to the stock market statements of the various groups.

Linglong Tire, for its part, benefits from a moderate-cost credit to build a nearly $ 1 billion tire factory in Serbia, on the doorstep of the European Union.

The Chinese tire industry “is experiencing a sluggish economy due to trade frictions,” the group said, citing a new US anti-dumping investigation.
“A factory abroad allows indirect growth by escaping trade barriers,” he said.

Bikes made in Vietnam
For the bike industry, the center of gravity is already moving out of China, according to HL Corp, whose customers have already begun relocating to Vietnam.

For bicycles “made in Vietnam”, “there are no anti-dumping taxes” American or European, and the local labor is much cheaper than in China, says to AFP Alex Lee, charged international sales for HL.

Chinese e-bikes are targeted by the United States, but also by the European Union, which has imposed anti-dumping duties of 22% to 84% since July, denouncing state subsidies and artificially Chinese manufacturers.

However, HL Corp says it continues to benefit from the support of the Chinese authorities even after relocating part of its production abroad.

HL has, for example, transferred the production of aluminum forks to Vietnam, previously done at its Chinese plant in Tianjin (east), Lee said. He says he does not know about any job cuts.

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