Chinese companies in a wide variety of industries, from oil refining to printing and souvenir production, have begun moving production to the United States in an effort to avoid high tariffs imposed as part of the trade standoff between Beijing and Washington. About this informs South China Morning Post.
Previously, Chinese companies shipped their goods duty-free, but now products are subject to a tariff of at least 90%. Locating production directly in the US avoids such costs, although it has its downsides, including high labor costs and stricter employment regulations.
Leo Li, the head of an electronic component manufacturing company in Shenzhen, opened a new facility in Nevada in early April. It assembles sensor modules with short supply chains and low labor requirements. In his opinion, despite the expense, the move is justified.
“Yes, my costs will increase, but it is not as critical as the 145% tariff. Our goal is to maintain the current volume of orders.”, he concluded.
Zhu Ning, head of a consulting firm that helps Chinese companies set up production in the U.S., said he has received more than 100 requests for support in the past four months alone, the same number as in the entire previous year. The construction of plants in the USA is especially appropriate for Chinese petrochemical companies engaged in oil processing, Ye Yingmin, the founder of the Beijing firm Chem1, believes.
According to him, earlier companies imported raw materials from the USA, processed them in China, and then exported the finished products back. This model currently leads to double taxation.
“In the petrochemical industry, where raw materials account for 80 to 90 percent of total costs, even a 10 percent tariff has a significant impact,” Ye Yingmin explained.
