Retail News CRM

Tag: US tariffs

  • Asian firms shuffle production around the region as US tariffs hit China

    Asian firms shuffle production around the region as US tariffs hit China

    A growing number of Asian manufacturers of products ranging from memory chips to machines tools are moving to shift production from China to other factories in the region in the wake of US President Donald Trump’s tariffs on Chinese imports.

    Companies including SK Hynix of South Korea and Mitsubishi Electric, Toshiba Machine Co and Komatsu of Japan began plotting production moves since July, when the first tariffs hit, and the shifts are now under way, company representatives and others with knowledge of the plans said.

    Others, such as Taiwanese computer-maker Compal Electronics and South Korea’s LG Electronics, are making contingency plans in case the trade war continues or deepens.

    The company representatives and other sources spoke on condition of anonymity because of the sensitivity of the issue.

    The quick reactions to the US tariffs are possible because many large manufacturers have facilities in multiple countries and can move at least small amounts of production without building new factories. Some governments, notably in Taiwan and Thailand, are actively encouraging companies to move work from China.

    The United States imposed 25% duties covering US$50 billion (RM206.5 billion) of Chinese-made goods in July, and a second round of 10% tariffs covering another US$200 billion of Chinese exports will come into effect this week. The latter rate will jump to 25% at the end of the year, and Trump has threatened a third round of tariffs on US$267 billion of goods, which would bring all of China’s exports to the United States into the tariff regime.

    The tariffs threaten China’s status as a low-cost production base that, along with the appeal of the fast-growing China market, drew many companies to build factories and supply chains in the country over the past several decades.

    At SK Hynix, which makes computer memory chips, work is under way to move production of certain chip modules back to South Korea from China. Like its US rival Micron Technology, which is also moving some memory-chip work from China to other Asian locations, SK Hynix does some of its packaging and testing of chips in China, with the chips themselves mostly made elsewhere.

    “There are a few DRAM module products made in China that are exported to the United States,” said a source with direct knowledge of the situation, referring to widely used dynamic random-access memory chips. “SK Hynix is planning on bringing those DRAM module products to South Korea to avoid the tariff hit.”

    Most of SK Hynix’s production won’t be affected, the source added, since China’s dominance in computer and smartphone manufacturing makes it by far the largest market for DRAM chips.

    Toshiba Machine Co says it plans to shift production of US-bound plastic moulding machines from China to Japan or Thailand in October.

    The machines are used for making plastic components such as automotive bumpers. “We’ve decided to shift part of our production from China because the impact of the tariffs is significant,” a spokesman said.

    Mitsubishi Electric, meanwhile, says it is in the process of shifting production of US-bound machine tools used for metal processing from its manufacturing base in Dalian, in northeastern China, to a Japanese plant in Nagoya.

    In Taiwan, an executive at notebook PC maker Compal, who declined to be named, said the trade war’s impact had been limited so far, but the company was studying its options.

    “We can also use facilities in Vietnam, Mexico and Brazil as alternatives,” the person said. “It won’t be easy because our majority production is in China; no other country can replace that at this moment.”

    Smaller companies are exploring their options too. South Korean medical equipment manufacturer IM Healthcare, which makes products including air purifiers, is studying a move to Vietnam or South Korea if the trade conflict intensifies, a source with direct knowledge of the matter said.

    Some Asian governments hope for an economic and strategic boost from the US-China conflict. In Taiwan, the government is actively encouraging companies to move production out of China, pledging last month to speed up its existing “Southbound Policy” to reduce economic reliance on China by encouraging companies to move supply chains to Southeast Asia.

    Taiwan economics ministry official William Liu said that the trade war was “a challenge and an opportunity” for the self-ruled island. Taiwan depends on China as an export market, he noted, but at the same time could see a boost in jobs from companies moving operations back home.

    Thailand also hopes to benefit from the “flow of technology and investment leaving China during the trade war”, said Kanit Sangsubhan, secretary-general of the Eastern Economic Corridor (EEC) Office of Thailand, which is coordinating a US$45 billion project to attract investment into the country. The EEC last month took some 800 representatives of Chinese companies on a tour around the eastern industrial heartland, and the country’s Board of Investment has done seven roadshows in China this year to woo investors.

  • Korea rush to lobby against U.S. auto tariffs

    Korea rush to lobby against U.S. auto tariffs

    Government officials and representatives from the local auto industry rushed to the United States last week to request that Korea be exempted from higher tariffs on imported cars.

    The Korean delegation, headed by Trade Minister Kim Hyun-chong, met with officials from the White House, Congress and think tanks during their U.S. trip from Wednesday to Friday, arguing that imported cars from Korea should be excluded from the tariff renewal based on Section 232 of the Trade Expansion Act.

    Finance Minister Kim Dong-yeon on Saturday also raised the issue at the G20 meeting held in Buenos Aires, Argentina.

    Kim Hyun-chong’s delegation included Hyundai Motor President Chung Jin-haeng and Korea Automobile Manufacturers Association President (KAMA) Kim Yong-geun, among others.

    The trade minister met with Larry Kudlow, the National Economic Council director, and Mick Mulvaney, the White House Office of Management and Budget director.

    “Kim explained that the revised Korea-U.S. FTA already reflects the concerns that the U.S. has about its automobile industry and security,” said an official from the Ministry of Trade, Industry and Energy on Sunday.

    In March, Korea agreed to extend a 25 percent tariff on Korean pickup trucks in the U.S. to 2041, instead of 2021, ensuring the unfavorable export conditions for Korea’s pickup truck manufacturers continues.

    “He also emphasized the fact that Korea and the United States impose zero tariffs on cars imported from each other’s country based on mutual benefits,” the official added.

    According to the ministry, the U.S. officials agreed with the Korean delegation and showed concern that the new tariffs might have a negative effect on America’s labor market and the economy considering the industry’s complex global supply chain.

    Hyundai Motor President Chung met with lawmakers based in Georgia and Alabama, two states where the automaker runs assembly lines. Korea International Trade Association Vice Chairman Han Jin-hyun mostly met with officials from the U.S. government and think tanks such as the Center for Trade and Economics and the Center for Strategic and International Studies.

    Finance Minister Kim Dong-yeon was also determined to prevent renewed tariffs.

    “Finance Minister Kim Dong-yeon explained to his U.S. counterpart that the two countries have been carrying out fair trade with the renewed Korea-U.S. FTA until now, and expressed his strong opposition to imposing higher tariffs on imported cars from Korea,” the Finance Ministry said in a release. “Kim also emphasized the positive effect that Korea’s auto industry has had in the U.S., such as hefty investment and employment,” the release added.

    U.S. President Donald Trump has been pushing for higher 25 percent tariffs on imported cars on national security grounds. The plan sent jitters through Korea’s auto industry, which relies heavily on exports to the U.S. According to industry statistics, 30 percent of exports to the U.S. last year came from the auto industry.

    Trade Minister Kim will continue to lobby U.S. officials. He will visit the United States from July 25 to July 27.

  • New US tariffs a headache for foreign automakers

    New US tariffs a headache for foreign automakers

    US President Donald Trump’s threat to impose steep tariffs on auto imports will hit foreign automakers that export a large number of vehicles to the US market, but many also manufacture cars domestically.

    Most of these brands, such as Mercedes and BMW as well as Nissan, Honda and Volkswagen, have at least one auto plant on US soil, where they employ tens of thousands of workers.

    These automakers have invested billions of dollars in their US facilities. Toyota and Mazda announced at the start of the year plans to build a US$1.6 billion joint facility in Alabama that will be capable of producing 300,000 vehicles a year.

    Volvo Cars, which plans to open a plant in South Carolina by the end of the year, has warned that new import duties would affect its investment plans.

    US auto market

    In 2017, about 17.2 million vehicles were sold in the United States, according to AutoData, which compiles figures from manufacturers and dealers.

    Nearly 8.7 million of these were imports, according to the Center for Automotive Research, mostly from Mexico and Canada — partners in the North American Free Trade Agreement — as well as from Japan, Germany and South Korea.

    Since the start of this year, the share of domestically-manufactured autos sold in the US has fallen to 50.1%, down from 51.1% over the same period in 2017, according to Edmunds.com.

    At least 82% of Volkswagens sold in the US were imports, according to Edmunds, as well as 55% of Toyotas, 57% of Hyundais, 70% of Mercedes-Benz and 68% for BMW.

    On the other hand, more than half the cars sold in the US by the “Big Three” in Detroit were made locally: 80% for Ford, 60% for General Motors and 55% for Fiat Chrysler.

    Honda is the sole foreign automaker manufacturing a large majority of its locally-sold cars in the United States.

    Major exporter

    The US auto industry is the largest US manufacturing sector which employs about eight million workers, directly or indirectly through related industries.

    It also is one of the largest export sectors, according to the American Automotive Policy Council, an industry body representing the major US manufacturers, General Motors, Ford and Fiat Chrysler, and foreign automakers.

    Auto exports virtually doubled between 2009 and 2015 to US$137.7 billion from US$74.1 billion, according to AAPC, supporting 771,000 US jobs.

    BMW and Daimler, maker of the Mercedes-Benz, notably send US-built cars to the European Union and China.

    BMW, which says its Spartanburg, South Carolina plant is the world’s largest, exported 70% of the 371,284 autos manufactured at the site last year, or about 272,346, representing about US$10 billion in total exports.

    Domestic manufacturing

    Toyota, which employs more than 36,000 people, has 10 factories at locations in Alabama, California, Mississippi and Texas. It produces 1.2 million cars and sells 2.4 million, according to 2017 figures, with the difference made up by imports.

    Honda, which employs 4,000, has factories in Alabama, George, Indiana and Ohio and produces 1.2 million, selling 1.6 million.

    German giant Volkswagen, which has a Tennessee factory with the capacity to produce 150,000 units annually, did not disclose production figures but sold 339,679 autos. It employs 2,444 workers.

    Daimler maintains auto plants in Alabama, Indiana, and South Carolina and has 4,900 local workers. In 2017, it produced more than 286,000 cars and sold 337,246.

    BMW, which employs nearly 9,0000 workers, produced 371,284 automobiles in 2017 in the US, and sold 305,685.

    Nissan maintains two factories in Mississippi in Tennessee and produced 930,000 autos, selling US$1.6 million. It employed 14,400 workers.

    Auto imports

    Volkswagen luxury brands Audi and Porsche have no US factories and as a result import all the vehicles sold in the US market. In 2017, Audi sold 226,511 units while Porsche brought 55,420 to market.