US Tariffs what's next?

If you are working in the supply chain there are likely two topics that have come up in every recent conversation; US Tariffs and Brexit. I can't quite bring myself to talk about the B- word just yet...

But it looks like the US tariffs may shortly be reaching some form of conclusion as the US and China reach a trade deal. But for those of us who have been monitoring this since "List1" and the roller coaster on-again-off-again, it could be naive to close it completely. Remember this is only described as a Phase 1 deal

I know a number of large US companies have well-progressed plans to move their manufacturing from China, and in many cases, it's not about moving production back to the US.

It can be hard to move your supply chain from China, the country did not become the world's manufacturing centre overnight. We consumers and the businesses that supply us wanted cheaper products. Initially, that meant outsourcing to Taiwan and China for lower labour rates.

Quickly businesses in China and the Chinese government saw an opportunity and over the past 20 years, and especially in the last 10 Chinese manufacturers have progressed rapidly up the value chain. Meanwhile, in the US and Europe, those skills have reduced. We are no longer producing in China for cost reasons we are producing there as its the best place and often the only place to produce goods today. To change that it's not just about moving a single factory, the inbound supply chain to that factory will likely have been developed and perfected over the years and that's before you look at all the other supporting functions quality, transport.

So whilst I am sure it is right for some, a rush to move production to Vietnam or other regions will likely bring about its own problems and disruption.

Many have chosen (or had no alternative) but to hold their course keeping production in China and accept the tariffs as they are. In turn, the cost of Tariff's has been passed to end customers. Despite the rhetoric, governments don't pay the duties the buyer or seller does, But even in these cases, there are lots to be done to ensure your factory's first costs and transport are as effective as they can be.

For any business supplying the US with China produced products, the supply chain should be a key focus area for cost savings efficiency and new opportunities. If you arent your competitors will be and your customers could be tempted elsewhere to those that have already taken action.