President Trump has given a directive to the US business community, and that is to leave China. But after hitting the front pages in newspapers across the planet, many US companies are now saying that they have already started moving their supply chains to diversify across Asia, just as the trade war is heating up. Trump has now said that US firms must, “immediately start looking for alternatives to China.”
After saying this in August, Trump repeated it again on Friday, saying that GM, a firm with a strong presence in China, should move its operations from China to the US.
Tump has now added to the duties of $112 billion of goods on Sunday, buy increasing tariffs from 10% to 15%. As the President makes demands on US firms, Malaysia, Vietnam and Indonesia are all getting more attention as they are now possible alternatives for supply chains.
While some firms have already started moving production out of China, others have invested heavily – Boeing and Apple are two major investors in China. China ordered 200 of the 737 MAX with production facilities in China adding $1 billion the the Chinese economy each year. Apple now procures supplies for components from China with 50% of the total based there, this is up 5% over the past 4 years.
The largest supplier, according to an article from CNBC attributed to J.R. Reed, Foxcom is located in China – 29 factories in China build products for Apple – a large percentage of Apple products are manufactured in the Middle Kingdom. Keep in mind that 25% of all manufactured goods in the world are made in China. Apple is said to have asked its major suppliers to run a cost analysis of moving 15% to 20% of production from China to other countries in the region. It seems that Vietnam will be a clear winning in the redistribution of supply chains around the region, China suffering impact that is now yet recognizable by the economic press.