By Mitchell Rona, Executive Vice President
Recently, US-China trade conflicts have resulted in a new tariffs being imposed on a wider number of goods manufactured in China, as well as a rise in existing tariffs. American companies and consumers (the importers) are paying the price for this battle of the worlds two largest economies; the duty does not fall on Chinese companies (the exporters). The “extra costs” are being sliced and diced up and down the entire supply chain hurting most businesses, consumers, and, many argue, the entire economy as a whole.
From the import side, American companies with long standing business interests in China are experiencing considerable stress and uncertainty. Prudent business professionals are examining this unsettled landscape and considering what action to take and how to manage our way forward.
For many, many products, the adage still applies: “There is no replacement for China but China.”
Seeking new markets for sourcing is wise and advisable if—and only if—it is practical and likely to be successful. Establishing a reliable supply chain abroad takes immense effort and involves significant risk; if these can be managed and mitigated, then it may make sense to look elsewhere. But a proven, time-honored venture abroad has tremendous value and this should not be discarded lightly.
When China is the best long-term source and most successful strategy within your limits, the best option is to simply make the best of the situation in the short term. Work with your supplier partners, make any other adjustments you can on your cost side and selling side to weather this rocky period. Depending on the product, you may find that you are not alone, and your best alternative is to stay the course and ride out the wave until it settles down.
It is important to remember that the entire supply chain will be affected by this, and the excess will be spread and divided across it. In most cases, sooner vs. later, the conflict will be settled. We look forward to that day, when we will be restored to a true global economy, enabling companies to find their best overall fit for growth, expansion, and prosperity for the future.