China is running out of time. Like thousands of others, my company is going to re-source out of China. I have a meeting Tuesday with our rep company to review a bid from Viet Nam. Cutting a new mold in Viet Nam is a fraction of the cost of the tariff on just one container of product. At this point, I am tired of the Chinese stirring the pot and will probably make the switch anyway.
So I gave him a jingle. In a lengthly interview covering a number of international trade topics, “Jim,” pretty much said, “I’m done with China.” Jim’s company designs and markets home consumer goods. He pointed out the huge risk China is taking by failing to take President Trump seriously in this tariff fight. In market segments like Jim’s, which require molds, jigs and/or specialized tooling, a move away from a current supplier, is only taken in expectation of a huge increase in revenue-profit and/or to obtain relief from restrictive or punitive regulation or costs. 25 percent tariffs put China at far more risk than the United States.
These high performance owners/CEOs will have already signed contracts in other, more favorable climes. They will have also built new molds, jigs and specialized tooling. All of this production infrastructure, will of course, incorporate the latest improvements. Thus, going back to China, would also entail going back to an older, less capable version of the required manufacturing assets. Who would want to do that?
My friend Jim, isn’t the only one. He was at a conference with a number of other manufacturers—a good many of them were on the same path as he—the road away from China. It’s too early to state boldly and one data point is not a trend, but China’s inability to read President Trump, just might have gutted its own economic future.
If we had a rational, protectionist trade policy, one that forced manufacturers to operate in the US, Jim would not have this problem. But our Ruling Class profits from de-industrialization and the immiseration of our working class.
ReplyDeleteThe unions in this country, particularly in the steel industry, had a major roll in the creation of the rust belt....they made it infinitely more logical to build new mills overseas than to restructure the decaying mills in the rust belt....they wern't the only cause, but they contributed to it greatly....greedy management coupled with a demanding work force was a lethal combination....if automation had been more readily available in the 60's and early 70's, perhaps the industries would've stayed, but the jobs would've still been gone....the stain on capitalism is the inherent unfairness of the system from the top down....the stain on socialism is the equal sharing of the misery by all except those at the top...either way, those on the bottom get stepped on to one degree or another.....given a choice, I'll take the free market....at least I have a shot at the brass ring....free market capitalism has freed more people than any other system the world has ever seen....
ReplyDeleteThanks for posting this, CW, I'm going to link it on my blog and Fascistbook. It all makes sense, and so do the two fellows before before me.
ReplyDeleteThis article is a joke. For a real taste of reality, one should read Johnathon Wards new book: "China's Vision of Victory".
ReplyDeleteGenerally good article, but I'll take conversations that never happened for $500, Alex. Vietnam? Another Chinese backdoor, like Canada and steel. That too will be plugged, and any CEO worth his salt will see this (it ain't "Jim"). This deal with Mex is huge in many ways and China is surely taking notice. Also, I get a kick out of the threat of China dumping $1T in US bonds. OK, go ahead and"dump" (sell) them; Japan's a buyer. Do you think the Reds are going to take a loss on the sale? Pffft. China's toast.
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