Sat, May 18, 2019 - Page 10 News List

Tariffs convince firms to leave China

FINAL STRAW:While many companies, such as Sierra Wireless and Ricoh, are moving their production to Southeast Asia, South America is also anticipating opportunity

Bloomberg

US President Donald Trump’s tariffs are helping to erode China’s appeal as a place where stuff gets made.

Ricoh Co is moving some manufacturing from China to Thailand to avoid potential risks from US-China trade tensions, the Japanese office-equipment maker said on Thursday.

The announcement came hours after a report that Taiwan’s Kenda Rubber Industrial Co (建大輪胎) is investing in Vietnam to do the same.

Those two examples are just the most recent from a chorus of executives who are citing the trade dispute as the final straw in their shift out of China, with margins already squeezed by rising labor costs, tougher environmental standards and domestic competition.

“The purpose is to minimize the impact of tariff increases,” Ricoh said in a statement, referring to the newly announced US tariffs on the rest of imports from China.

The firm is to produce all US-bound multifunction printers in Thailand instead of Shenzhen.

It said it would consider various changes to its production structure, including moving more production to Thailand from China, to “respond to various risks and improve efficiency.”

Big consumer brands Samsonite International SA, Macy’s Inc and Fossil Group Inc have all said that they are continuing to move production and sourcing out of China.

“We’re generally under an initiative to kind of shift what we can from China, which we were doing even ahead of tariffs,” Samsonite CEO Kyle Gendreau said on a call on Tuesday. “And we’re just continuing to accelerate on the mix of what’s coming from China to kind of mitigate the impacts there as well.”

The threatened tariffs of 25 percent on all exports to the US, which accounts for one-fifth of China’s total outbound shipments, are set to give China the stiffest test of its role as the core of the global supply chain.

For Cisco Systems Inc, shipping from other nations is the way to go.

“We still have some manufacturing happening in China, but we have greatly, greatly reduced our exposure working with our supply chain and our suppliers,” chief financial officer Kelly Kramer said on a call with analysts on Wednesday when asked about the impact of the tariffs. “So the impact that we’re expecting, again we are trying to mitigate.”

Retailing giant Walmart Inc, whose clout with suppliers gives it some room to maneuver, indicated that shoppers would absorb some of the costs of higher levies.

“We will do everything we can to keep prices low, but increased tariffs lead to increased prices,” chief financial officer Brett Biggs said in an interview on Thursday.

Finding alternative manufacturers “is one of a number of actions that our merchants are considering,” he added.

Some businesses have already moved following last year’s tariffs on the first batch of Chinese products.

Communication equipment producer Sierra Wireless Inc has almost completed moving some production to Vietnam, reducing the firm’s exposure to further trade flaring, chief financial officer David McLennan said on May 9.

While Chinese exporters reel at the escalating tensions, other nations and businesses are extending invitations to those driven out of China.

If the trade dispute between the US and China continues, it opens “a door for South America to occupy this space,” Fernando Queiroz, CEO of the Sao Paulo-based meat producer Minerva SA, said on Wednesday.

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