According to a report released earlier this month, U.S. companies are increasingly shifting imports from China to countries like Vietnam, South Korea, Mexico, and Taiwan, in an effort to avoid the high tariffs imposed on Chinese purchases during the current trade war.
With the current trade war waged on China, President Donald Trump has imposed tariffs of up to 25% on the purchase of Chinese products. This dramatically increases the overall costs that U.S. companies are looking to spend, causing them to search for new alternatives. According to S&P Global Market Intelligence, the number of containerized freight imported from China fell 6.4% in the first corner. In order to avoid paying the high tariffs, U.S. companies have rerouted the majority of their purchases to less expensive countries. However, many companies also chose to order mass purchases from China ahead of the tariff increases in an effort to stockpile their products.
Many of the companies choosing to reroute their imports are associated with the furniture industry, but these are not the only markets struggling to avoid tariffs. While large furniture retailers, like Home Depot and Target, decreased Chinese imports by up to 13.5%, appliance retailers like Samsung and LG were also part of a major shift in Chinese imports.
Data collected from the first quarter of the imposed tariffs also reflected that the auto industry is yet another market looking elsewhere for the purchase of their products. Instead, industries like these, who have formerly depended on China’s low production costs, are now looking to countries like Vietnam, Taiwan, Mexico, and South Korea. On the purchase of refrigerators alone, imports from South Korea and Mexico were increased by around 32%. Meanwhile, the total shipments from Vietnam have increased by over 141%.
However, in addition to avoiding imports from China, companies in the United States have also been rethinking Chinese factory investments. As companies struggle to find alternative solutions, economists estimate that this uprooting has already cost consumers and companies over $19 billion.
Going forward, it appears as though U.S companies and retailers will continue to shift their imports to lower-cost countries as long as the high tariffs on Chinese products remain in place. However, this transitionary period has already proven costly for both U.S consumers and companies.
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