In the midst of conversations about high tariffs or taxes on imported goods, a migration of the manufacturing industry outside China has begun, while some companies increase the US inventory to beat the clock before new “Trump tariffs” enter into force.
Trump has talked about imposing tariffs of 10% or more to the existing goods of China, and 25% to Mexico and Canada, along with high tariffs for many other nations. If promulgated, they could boost inflation and transfer the supply of everything, from steel to shoes, to the US coast, or simply to other nations.
But the conversations and the belief that something is likely to happen are already promoting that imports are made before the difficult tariffs to handle can go into force.
“Maritime carriers have seen an increase in the number of people who bring more products to store in case of emergency,” said Tim Binkis, customer successful director at ICC Logistics Services, in Hicksville. “Customers have been looking for other regions of the world to manufacture and import, even before Trump was chosen.”
China remains the manufacturing home of many products made for Long Island and other companies throughout the country, despite some tariffs already in force. But many believe that a new round could make a big difference.
“Despite tariffs based on political relations, US companies continue to import from China,” said Nabil Nahra, owner of Premium Products International, a marketing consulting company that works with ICC Logistics. «It has been working. Why change? While the consumer pays the additional price, let’s continue doing so ».
Even so, a mini migration and diversification has begun outside China. Steve Madden said a few days ago that he accelerated the plans to move 40% of the manufacture of his brand of $ 3 billion of China in a year to Cambodia, Vietnam, Mexico and Brazil.
Mazda moved some of its manufacturing parts from China and Apple is moving some of its manufactures from China to India.
The Make In Indian Plan of the Indian government seeks to attract foreign investment in manufacturing with tax exemptions and subsidies.
«If tariffs are imposed, the impacts will not be limited only to the years in which Trump is president. Companies will be forced to look for other places that are not China, ”said Nahra. “The friendlier the country is, the lower the tariffs.”
The truth behind tariffs
Donald Trump has praised tariffs as the best from butter – or maybe margarine. “For me, the most beautiful word in the dictionary is’ tariffs,” Trump said. “It’s my favorite word.” He described the tariffs as “the greatest thing ever invented” and called himself “tariff man” (“the man of tariffs”). But what do tariffs have magic?
A kind of import tax on imports, which do not pay directly consumers, tariffs can be used to try to influence the place where goods are manufactured – as well as to impose consequences for countries with policies against. Even before Trump, billions of dollars had already been applied in tariffs.
For the fiscal year that ended on September 30, the United States government hoped to raise 81,4 billion dollars in tariffs and fees through customs and border protection agents in 328 entry ports.
Trump can increase tariffs unilaterally under Section 301 of the 1974 Commerce Law that applies to nations that participate in unfair or discriminatory commercial practices or section 232 of the Commercial Expansion Law of 1962, to protect national security.
The effect of pandemic
The problems of the supply chain and the pandemic in China have already promoted diversification beyond China. “From the pandemic, people have analyzed more closely the diversification of their supply chain,” Binkis said about “contingency plans and different options.”
Binkis added that “small packages of packages have emerged from pandemic” and “companies are starting to use them.” Countries like India, Vietnam, Pakistan, Thailand and South American regions beyond Mexico are looking for US manufacturing.
“Many customers are considering Brazil,” Binkis said. «Brazil has developed technology and infrastructure to manufacture».
Nahra is helping small and medium enterprises to transfer China’s manufacturing to Brazil, including babies, basketball balls and high -end promotional items with blinds in process. Binkis said a client who manufactures bathtubs in China is considering the possibility of supplying in Brazil. «It’s not just about political climate. It could be the weather, or that your supplier has problems, ”he said. “They want to try to diversify.”
Tariff wars
Although Trump says he is trying to end wars and avoid them, their policies could light commercial wars. Trump’s tariffs on steel and aluminum have already led China to impose retaliation taxes on the bourbon and Harley-Davidson motorcycles. And the United States also faces great tariffs of other nations, such as Harley Davidson in India.
About 40 % of Mexico’s gross domestic product is exported, including 80 %, to the United States, which makes it vulnerable to tariffs. “Mexico is a small country,” said Nahra. “They will modify their behavior.”
Others talk about commercial wars and tariffs as if they potentially throw gasoline into the fire of inflation. “The first thing that worries me is the tariffs,” said John Bolton, former Trump National Security Advisor, according to Foreign Policy magazine. “We could have an economic crisis in the first 6 months of the administration.”
China’s letter
China has been the cradle of global textiles, and has begun to move to Thailand, Vietnam and other places, Nahra said.
“China has inflation like us,” Nahra said on another factor. “Its cost of doing business has increased a lot in recent years.”
There are benefits in transferring manufacturing closer to the United States, since transport costs are triggered.
Nahra said that China’s shipping costs to Los Angeles from June to July increased from $ 3,500 to $ 7,000 per standard container. The shipping companies added surcharges of $ 800 in 40 -foot containers from Asia as of February, Nahra added.
“Due to political tension and war in the Gulf, they had to divert shipments, so they added surcharges,” said Nahra. “The cost of containers adds at least 15% to the price of a product, which is devastating.”
The immediate impact
The Peterson Institute of International Economics concluded that the reprisals of Trump’s tariff proposals in the primary could subtract a percentage point from the US economy in 2026 and increase inflation by two percentage points.
But Trump is not the only one who uses tariffs to protect American companies. In May, the Biden administration imposed tariffs at 18,000 million dollars in Chinese products, including semiconductors and electric vehicles, which, as reported, is equivalent to a tax increase of 3.6 billion dollars.
It is not clear if companies will produce in the country, that is, they will manufacture in the United States, or to what extent. “That is the reason for the impulse, get more manufacturing here in the United States,” Binkis said. “The United States is a potential winner from the perspective of manufacturing.”
A study by the Massachusetts Institute, the University of Zurich, Harvard and the World Bank determined that the first round of Trump tariffs “neither increased or reduced employment in the United States.” Binkis said that automation will play an important role in manufacturing, transport and storage, but it is not clear what will move to.
“You need a lot of time to make the change,” said Nahra. “Many countries have capacities, but they have not been aggressive when promoting them.”
BMW already manufactures its X3 and X 5 models in the United States and sends to everyone. Therefore, part of the manufacture has already moved here, but it is not clear what will happen next.
«As tariffs increase costs, more products will be manufactured in the United States. When that happens, it will remain, ”said Nahra. «It’s not just a matter of tariffs. We have technology, infrastructure instead. And the stability and the cost of doing business ».
