Many firms shrug off trade war

Business Day - - FRONT PAGE - Brenda Goh Shang­hai

As the US-China trade war drags into its 16th month and keeps dis­rupt­ing sup­ply chains, more than 25% of multi­na­tional com­pa­nies have not made con­tin­gency plans, a sur­vey by a sub­sidiary of courier gi­ant DHL shows.

As the US-China trade war drags into its 16th month and keeps dis­rupt­ing sup­ply chains, more than 25% of multi­na­tional firms have not made con­tin­gency plans, a sur­vey by a sub­sidiary of courier gi­ant DHL shows.

The sur­vey by Re­silience36­0, a sup­ply chain risk man­age­ment soft­ware plat­form un­der Deutsche

Post’s courier unit, in­cludes 267 anony­mous re­sponses from sup­ply chain ex­ec­u­tives across in­dus­tries such as health care, au­to­mo­tive and con­sumer.

More than half of the re­spon­dents were from com­pa­nies with an­nual rev­enue of more than 1-bil­lion yuan ($142m) and most were from the US and EU, the sur­vey showed.

Of the re­spon­dents, 48% from the en­gi­neer­ing and man­u­fac­tur­ing in­dus­try and 40% from the au­to­mo­tive mo­bil­ity sec­tor re­ported that they had no con­tin­gency plans at all, even though both fields have been heav­ily tar­geted by both coun­tries in the trade war.

“We’re now deal­ing with such a new fron­tier that most sup­ply chain pro­fes­sion­als have not en­coun­tered this be­fore and it’s so new that a lot of peo­ple are strug­gling to even un­der­stand what they can do to deal with it,” said Sheh­rina Ka­mal, prod­uct di­rec­tor for risk mon­i­tor­ing at DHL Re­silience36­0.

Of those that had de­cided against re­lo­cat­ing or shift­ing pro­duc­tion out of China, some said they were un­af­fected by the trade war. How­ever, 43% said long-es­tab­lished connection­s with Chi­nese fac­to­ries and sup­pli­ers as well as cost and time were among rea­sons for stay­ing put. Just 8% of re­spon­dents said they ex­pected tar­iffs to even­tu­ally be re­moved.

Of the 12% of re­spon­dents that have moved man­u­fac­tur­ing out of China, some said they faced headaches such as a lack of skilled labour, heavy port con­ges­tion and main­tain­ing sup­plier qual­ity. In­dia and Viet­nam were among the most pop­u­lar al­ter­na­tive lo­ca­tions.

The US and China have im­posed tar­iffs on bil­lions of dol­lars worth of each other’s goods since July 2018 as trade fric­tion be­tween the two big­gest economies wors­ened de­spite sev­eral rounds of talks. A deal that would cool trade ten­sion and roll back some of the tar­iffs had been ex­pected in Novem­ber but has yet to be agreed.

The dis­rup­tion has led other Asian coun­tries to compete for in­vest­ment from com­pa­nies mov­ing sup­ply chains to es­cape higher tar­iffs, with gov­ern­ments of­fer­ing tax breaks, promising to slash red tape and send­ing trade mis­sions.

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No wor­ries: More than 25% of multi­na­tional firms have made no con­tin­gency plans in the face of the trade war.

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