How is the US - China trade war affecting manufacturing in the US?

Answered August 30 2019

The current U.S. – China trade war is likely going to increase costs for those who continue sourcing materials from China. For manufacturers who are savvy and agile enough to switch to other sources, there will likely be little impact.

trade war, manufacturing, upkeep

Has there been additional stateside business?

While the intent of the tariffs on the U.S.’s end was to move more manufacturing stateside, that doesn’t seem to be happening—in fact, only about 6% of businesses moving their production out of China are bringing it to the U.S.

This means American factories probably won’t see large influxes in business. Instead, other countries such as Mexico, Vietnam, and Indonesia will benefit as companies move their operations to those areas.

Possible increase in costs

For manufacturers already operating in the U.S., there is a possibility that their own operational costs may increase as a result of higher tariffs. This is mainly the case for manufacturers who use parts that they import from Chinese factories.

For instance, replacement parts and supplies that use components from China may increase in price. This will make it more costly to maintain MRO (maintenance, repair, and operations) inventories.

On the other hand, if they begin sourcing those supplies from companies using other offshore producers, that increase may not occur. Depending on the prices coming from those countries, the result will likely be constant—or possibly even reduced—costs overall.

A need for adaptability

Ultimately, the results come down to how adaptable U.S. manufacturers prove to be.

If you’re constantly monitoring the market and taking care to source materials from the most cost-effective places, you’ll likely see little impact from the ongoing trade war. If anything, your materials are less likely to be stamped with “Made in China” and more likely to come from other countries.

On the other hand, manufacturers that continue to source their materials from China will experience an increase in operating and production costs. They’ll be forced to pass on at least some of those costs on to their customers.

Note: Facilities operating in the U.S. aren’t likely to see a huge infusion of business as other companies pull out of China. This means that things will remain more or less constant for those who aren’t actively importing materials from overseas.