Chi­nese ex­porters scram­ble to cope with Trump tar­iff hike

Sun.Star Pampanga - - PERSPECTIVE! WORLD! - (AP)

B EIJING -- Fac­ing a pos­si­ble U.S. tar­iff hike, one of China's big­gest ball bear­ing mak­ers, Cixin Group, is weigh­ing plans to rush ship­ments to Amer­i­can cus­tomers be­fore the in­crease makes its sales un­prof­itable.

The com­pany in the eastern city of Ningbo is among ex­porters of goods from mo­tor­cy­cle parts to elec­tron­ics that are scram­bling to cope with Pres­i­dent Don­ald Trump's higher du­ties by ship­ping early, rais­ing prices or find­ing new mar­kets.

The 25 per­cent in­crease would turn Cixin's prof­its to losses in the U.S. mar­ket, which takes 30 per­cent of its ex­ports, ac­cord­ing to Wang Liqiang, a com­pany man­ager.

"We are con­sid­er­ing man­u­fac­tur­ing as many ball bear­ings as pos­si­ble for the U.S. mar­ket be­fore the im­po­si­tion of tar­iffs," said Wang. "We can do it by work­ing over­time."

Some com­pa­nies are look­ing at ways to hide their Chi­nese ori­gin by ship­ping goods through other coun­tries.

"Maybe cus­tomers will buy from South Amer­ica, and then South Amer­ica sells to the U.S.," said Yvonne Yuan, a sales man­ager for Shen­zhen Tianya Light­ing Co., a man­u­fac­turer of LED bulbs.

Trump says higher du­ties on $50 bil­lion of Chi­nese goods are meant to pun­ish Bei­jing for steal­ing or pres­sur­ing foreign com­pa­nies to hand over foreign tech­nol­ogy.

The plan tar­gets goods U.S. of­fi­cials say ben­e­fit from im­proper Chi­nese poli­cies in­clud­ing ma­chin­ery, in­dus­trial com­po­nents and aero­space, tele­coms and other tech­nol­ogy.

Trump left time to ne­go­ti­ate. A pub­lic com­ment pe­riod runs through May 11, with a hear­ing sched­uled May 15.

Economists and Chi­nese of­fi­cials say the tar­iff hike's over­all im­pact on China should be lim­ited. But for ex­porters that de­pend on the U.S. mar­ket, the po­ten­tial costs are alarm­ing.

Knock-on ef­fects could greatly in­crease the im­pact, Moody's In­vestors Ser­vice re­searchers said in a re­port. It said that Chi­nese man­u­fac­tur­ers that sup­ply in­puts to tar­geted sec­tors would see re­duced de­mand and more pric­ing pres­sure, spread­ing the ef­fects of tar­iffs deeper into the Chi­nese econ­omy. Man­u­fac­tur­ing and pro­cess­ing of met­als and metal prod­ucts, as the key in­put sec­tors for tech­nol­ogy-prod­uct man­u­fac­tur­ing, would be hurt the most.

Chi­nese ex­porters sup­ply most of the world's mo­bile phones, per­sonal com­put­ers, tele­vi­sions, toys and other light man­u­fac­tured goods from thou­sands of fac­to­ries.

They are flex­i­ble and re­source­ful but many are strug­gling with higher costs and slow­ing de­mand. China's to­tal ex­ports last year rose 7.9 per­cent, down from the heady dou­ble-digit rates of the past decade.

The United States buys about 20 per­cent of China's ex­ports. But Amer­i­cans are es­pe­cially im­por­tant to ex­porters be­cause they buy elec­tron­ics and other high­value goods, in­clud­ing many tar­geted by Trump's tar­iffs.

Some ex­porters al­ready are reel­ing from pre­vi­ous U.S. tar­iff in­creases of up to 500 per­cent on wash­ing ma­chines, so­lar mod­ules and some metal prod­ucts, meant to off­set what the Trump ad­min­is­tra­tion says are im­proper sub­si­dies that al­low them to sell at un­fairly low prices.

Oth­ers are con­fi­dent Amer­i­can cus­tomers can­not do with­out them.

Mak­ers of mo­tor­cy­cle com­po­nents plan to use that lever­age to ask buy­ers to split the cost if tar­iffs rise, said Pan Jianle, an of­fi­cial of the Mo­tor­cy­cle Parts As­so­ci­a­tion in Wen­zhou. She said they ex­port world­wide but the United States is their No. 1 mar­ket.

"The U.S. mo­tor­cy­cle parts in­dus­try re­lies heav­ily on China," said Pan. "It is dif­fi­cult for U.S. cus­tomers to find prod­ucts with good qual­ity and value for money from other places."

Such a po­lit­i­cally charged con­flict has left com­pa­nies and lo­cal Chi­nese of­fi­cials jumpy.

Pan de­clined to pro­vide the value of ex­ports of mo­tor­cy­cle com­po­nents to the United States. A few hours later, the Wen­zhou city govern­ment's foreign af­fairs of­fice called AP to ask about its in­ter­views.

Elec­tron­ics man­u­fac­tur­ers also plan to ask buy­ers to share higher costs, said Li Zengyou, sec­re­tary gen­eral of the lo­cal man­u­fac­tur­ing cham­ber of com­merce in the eastern city of Zibo in Shan­dong prov­ince.

Zibo's elec­tron­ics ex­ports to the United States last year to­taled $1 bil­lion, ac­cord­ing to Li. That would mean if the tar­iff hike ap­plied to all their sales, it could add $250 mil­lion to the cost.

If higher tar­iffs hit, "they will raise the price," said Li. "If the U.S. cus­tomers failed to ac­cept it, they would stop ex­port­ing to the United States and turn to ex­plore other mar­kets."

Ningbo-based Cixin Group's mar­gins in the United States are about 10 per­cent, which would be wiped out by a 25 per­cent tar­iff hike, said Wang. The com­pany also ex­ports to Eu­rope and Latin Amer­ica.

"We can't bear all the costs," he said. "We can try to in­crease our ex­ports to other coun­tries, but it is not easy to es­tab­lish a longterm re­la­tion­ship with new cus­tomers."

In this April 18, 2015, file photo, a worker pre­pares a dis­play ahead of the Auto Shang­hai show, to be held at the Na­tional Ex­hi­bi­tion and Con­ven­tion Cen­ter in Shang­hai. (AP)

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