Asian firms shuffle production around the region as tariffs hit
US ports fear they will be big losers in trade war
Companies make contingency plans in case trade war continues or deepens SEOUL/TOKYO, Sept 23, (RTRS): A growing number of Asian manufacturers of products ranging from memory chips to machines tools are moving to shift production from China to other factories in the region in the wake of US President Donald Trump’s tariffs on Chinese imports.
Companies including SK Hynix of South Korea and Mitsubishi Electric, Toshiba Machine Co and Komatsu of Japan began plotting production moves since July, when the first tariffs hit, and the shifts are now under way, company representatives and others with knowledge of the plans told Reuters. Others, such as Taiwanese computer-maker Compal Electronics and South Korea’s LG Electronics , are making contingency plans in case the trade war continues or deepens.
The company representatives and other sources spoke on condition of anonymity because of the sensitivity of the issue.
The quick reactions to the US tariffs are possible because many large manufacturers have facilities in multiple countries and can move at least small amounts of production without building new factories. Some governments, notably in Taiwan and Thailand, are actively encouraging companies to move work from China.
The United States imposed 25 percent duties covering $50 billion of Chinese-made goods in July, and a second round of 10 pexcent tariffs covering another $200 billion of Chinese exports will come into effect next week. The latter rate will jump to 25 percent at the end of the year, and Trump has threatened a third round of tariffs on $267 billion of goods, which would bring all of China’s exports to the United States into the tariff regime.
The tariffs threaten China’s status as a low-cost production base that, along with the appeal of the fastgrowing China market, drew many companies to build factories and supply chains in the country over the past several decades.
At SK Hynix, which makes computer memory chips, work is under way to move production of certain chip modules back to South Korea from China. Like its US rival Micron Technology, which is also moving some memory-chip work from China to other Asian locations, SK Hynix does some of its packaging and testing of chips in China, with the chips themselves mostly made elsewhere.
“There are a few DRAM module products made in China that are exported to the United States,” said a source with direct knowledge of the situation, referring to widely used dynamic random-access memory chips. “SK Hynix is planning on bringing those DRAM module products to South Korea to avoid the tariff hit.”
Most of SK Hynix’s production won’t be affected, the source added, since China’s dominance in computer and smartphone manufacturing makes it by far the largest market for DRAM chips.
Toshiba Machine Co says it plans to shift production of US-bound plastic moulding machines from China to Japan or Thailand in October.
The machines are used for making plastic components such as automotive bumpers. “We’ve decided to shift part of our production from China because the impact of the tariffs is significant,” a spokesman said.
Mitsubishi Electric, meanwhile, says it is in the process of shifting production of US-bound machine tools used for metal processing from its manufacturing base in Dalian, in northeastern China, to a Japanese plant in Nagoya.
In Taiwan, an executive at notebook PC maker Compal, who declined to be named, said the trade
war’s impact had been limited so far, but the company was studying its options.
“We can also use facilities in Vietnam, Mexico and Brazil as alternatives,” the person said. “It won’t be easy because our majority production is in China; no other country can replace that at this moment.”
Smaller companies are exploring their options too. South Korean medical equipment manufacturer IM Healthcare, which makes products including air purifiers, is studying a move to Vietnam or South Korea if the trade conflict intensifies, a source with direct knowledge of the matter said.
Some Asian governments hope for an economic and strategic boost from the US-China conflict. In Taiwan, the government is actively encouraging companies to move production out of China, pledging last month to speed up its existing “Southbound Policy” to reduce economic reliance on China by encouraging companies to move supply chains to Southeast Asia.
Taiwan economics ministry official William Liu told Reuters that the trade war was “a challenge and an opportunity” for the self-ruled island. Taiwan depends on China as an export market, he noted, but at the same time could see a boost in jobs
from companies moving operations back home.
Thailand also hopes to benefit from the “flow of technology and investment leaving China during the trade war”, said Kanit Sangsubhan, Secretary-General of the Eastern Economic Corridor (EEC) Office of Thailand, which is coordinating a $45 billion project to attract investment into the country. The EEC last month took some 800 representatives of Chinese companies on a tour around the eastern industrial heartland, and the country’s Board of Investment has done seven roadshows in China this year to woo investors. NEW YORK, Sept 23, (AFP): America’s ports are fearful that they will be big losers as the escalating trade fight between Washington and Beijing bites into business.
The anxiety is that tit-for-tat tariffs between the two economic superpowers will crimp shipments, denting port revenues.
Kurt Nagle, head of the American Association of Port Authorities, called the state of play “concerning,” following the latest back-and-forth this week between the United States and China.
“The total amount of tariffs and international retaliation affect 10 percent of the total trade in American ports,” or about $160 billion in revenues, Nagle said.
The various trade wars thus far have had a mixed effect, with some ports seeing sharp declines in some products, even as others report a surge in activity intended to beat the new levies.
The mammoth US economy is sustained by about 100 ports around the country that manage the flow of goods inward and outbound at points of embarkation along the Pacific and Atlantic Oceans, the Gulf of Mexico and the Great Lakes.
In the first six months of 2018, the port of New Orleans saw a drop of 350,000 tons of steel compared with the year-ago period, a big hit for a flagship product that is used in a petroleum-focused region.
“It represents between three and five million dollars,” said Robert Landry, vice president of the Port of New Orleans. “For us it’s very big.”
Major sources of the steel include Turkey, China and South Korea. All but South Korea were affected by a 25 percent tariff on steel imposed by US President Donald Trump this spring.
The New Orleans port also suffered a 10 percent drop in aluminum imports, which was also included in the same tariff action, while retaliatory Chinese tariffs on poultry have hit those exports.
Meanwhile, with new tariffs looming in the US-China standoff, the Port of Los Angeles has seen a surge in some products.
“In May, June and July, cargo owners tried to beat the volumes,” said Phillip Sanfield, a spokesman for the port, for which China is a key market, accounting last year for about half its trade in total value.
But the acceleration earlier this year may not last after the United States this week announced tariffs on $200 billion worth of Chinese goods, a move quickly followed by the Chinese rebuttal to impose levies on $60 billion in US goods.
Trade war fears are also a source of unease for port workers, particularly in areas like southern California where the ports of Los Angeles and Long Beach account for one in nine jobs. There are about three million port workers nationwide.