By kckate16 @ Shutterstock.com
Though it won’t be pain-free, if U.S. / China trade relations continue to devolve, it is the U.S. that is likely to come out on top. America’s multinationals are already engaging in contingency planning in the event of further tariff increases. Bloomberg News reports:
Earnings reporting season is underway, and analysts are eager to hear from executives about how an escalating trade war between the U.S. and China is impacting their businesses. A common theme is that they are ready to relocate supply chains if the cost of importing Chinese goods becomes prohibitive.
U.S. President Donald Trump imposed a 10 percent tariff on $200 billion of Chinese imports in September — following an earlier round of tariffs on $50 billion of goods — and promised to raise the duty to 25 percent in January. He’s also threatened to expand the levy to all products imported from China — an amount that totaled $531 billion in the 12 months through August, according to the latest data from the U.S. Department of Commerce.
Here’s what companies are telling analysts:
Avery Dennison Corp.
“If there was a broad-based tariff on apparel, I think you could see a bit more of an acceleration of the migration out of China into other regions for apparel sourcing,” Mitch Butier, chief executive officer of the California label producer, said during an Oct. 23 earnings call. “That will take time. They’re just a huge infrastructure within China. That will take some time.”
Canadian National Railway Co.
“Especially light manufacturing, factories move very quickly. A number of them have already moved out of China,” Jean-Jacques Ruest, CEO of the Canadian railway company, said during an Oct. 23 earnings call. “They’re going to Vietnam. They’re going to Bangladesh. They’re going to Indonesia. And the product is still being made.”
Read more here.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- The Worst Chinese Economy in 30 Years - October 18, 2019
- Can Boris’ Brexit Deal Pass? - October 17, 2019
- Are Low Interest Rates Amplifying Market Shocks? - October 16, 2019