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You Guys
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Sunday, July 21, 2019

The Trump Trade War Is Remapping Global Supply Chains To The Detriment of China

Make no mistake about it, the trade war is absolutely remapping global supply chains ... to the detriment of Chinese manufacturing. 
The percentage of China-leaving businesses surveyed by quality control and supply chain auditor QIMA was 80% for American companies and 67% for those based in the European Union. 
QIMA has more than just anecdotal evidence. Demand for their China-based audits dropped by 13% as mainland manufacturers are either losing their foreign clients faster due to costs associated with tariffs or are relocating part of their manufacturing out of China to avoid those tariffs. 
European companies are less affected by the trade war because their countries have not slapped tariffs on Chinese imports. But QIMA thinks they have their own reasons to reduce their dependence on China manufacturing. Most are diversifying throughout southeast Asia and closer to home. 
This ongoing diversification of the global supply chain creates ample opportunities for corporate investors and gives rise to new markets in countries like Vietnam, now getting the equivalent of a steroid shot to beef up their own economy. 
QIMA’s quarterly barometer reporter was released last week. It combines data from the ground collected through tens of thousands of inspections and audits of more than 150 companies across consumer products sectors. 
The trade war has pushed many Chinese and American multinationals over the edge. For years, both sides have been sourcing goods in countries like Vietnam and Bangladesh. 
This has been particularly true of apparel, which is now as likely to read Made in Vietnam on the clothing tag as it once read Made in China. Companies were moving as China’s labor costs rose and as the government made strides in catching up to Western-style environmental laws. 
That is not the case in smaller southeast Asian nations, though a move there is not necessarily a step back in time to the 1990s, where China was all cheap labor and ignored pollution and labor rights.   
In the latest QIMA survey, over 75% of U.S. respondents reported being affected by the tariffs, saying rising costs associated with them is one of the most serious impacts on their business. As a result, they are moving or looking to move faster than they once had planned. Europe is in the same boat.
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