The world’s largest bicycle maker is taking no chances.
In September, when President Donald Trump began threatening massive tariffs on Chinese exports to the United States, Giant Manufacturing Co. — located in China — decided to move production of all U.S.-bound bicycle orders to Taiwan to avoid looming financial hits.
“When Trump announced the plan of 25% tariffs, we took it seriously,” Chairwoman Bonnie Tu said, according to Bloomberg. “We started moving before he shut his mouth.”
Then she dropped a zinger: “Last year, I noticed that the era of Made In China and supplying globally is over.”
That bold statement isn’t too far outside the realm of reality, as other major companies have recently considered diversifying away from China.
Last week, Intel Corp. noted that it will be taking a look at its global supply chain in the wake of the U.S.-China trade battle.
In addition, Li & Fung Ltd. — the world’s largest supplier of consumer goods located in Hong Kong — decided to take precautions against potential tariffs and is considering building new facilities outside China.
In a presentation last week, Li & Fung CEO Spencer Fung noted that China originally became a manufacturing superpower because of easy sourcing and production efficiency.
“They just put all their eggs in the China basket because the Chinese are very capable,” Fung said. Now, “the trade war is basically forcing people to rethink their entire global sourcing strategy and to diversify away from China.”
In other words, China is not only feeling the heat from the United States, but from companies within China’s own borders, which will undoubtedly grab its attention.
Despite all the talk, Giant Manufacturing is one of the first to take action, as the bike maker shut down its China plant in 2018 and moved most U.S. orders to Taiwan. Last July, the company announced a new factory in Hungary, since “moving production close to your market is a trend.”
“The world is no longer flat,” said Tu, playing off Thomas Friedman’s book “The World Is Flat,” which describes how companies and industries supposedly have a level playing field across the world for trade and commerce. “The concept is no longer affordable in every place.”
This comes on the heels of a massive wave of new tariffs on China, as Trump ups the ante in his trade negotiations.
“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday,” Trump tweeted in May.
“325 Billions Dollars… of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” Trump concluded.
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
This is a positive side effect of Trump’s tough — and controversial — stance on trade. China will feel the pressure of those companies taking business out of their market, ultimately — and reluctantly — bringing them back through an agreement with the U.S.
While Trump’s negotiation tactics appear brash, the results are shaping up — the U.S. is taking back the high ground and won’t let China off as previous administrations have done.
Trump promised he could help America win the trade war and he appears to be doing so.
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