Asian firms shuffle production around the region as US tariffs hit China
SEOUL/TOKYO: 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.
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 US imposed 25% duties covering US$50 billion (RM26.5 billion) of Chinese-made goods in July, and a second round of 10% tariffs covering another US$200 billion of Chinese exports will come into effect this week. The latter rate will jump to 25% at the end of the year, and Trump has threatened a third round of tariffs on US$267 billion of goods, which would bring all of China’s exports to the US into the tariff regime.
The tariffs threaten China’s status as a low-cost production base that, along with the appeal of the fast-growing China market, drew many companies to build factories and supply chains in the country over the past several decades.
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.
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 Office of Thailand. – Reuters