The U.S. has levied 25% fees on up to $250 billion worth of goods imported from China, forcing manufacturers to either swallow the additional costs or pass the difference onto consumers. But reports suggest that some companies are choosing a third option: shifting production outside of China.
In a poll released by the American Chamber of Commerce (AmCham) and its counterpart in Shanghai last month, roughly 40% of 250 surveyed firms said they were “considering or have relocated manufacturing facilities outside of China.” In a similar AmCham survey last September, only 30% said they were considering partial relocation. However, the exit can’t all be chalked up to the trade war.
Rising labor costs have been driving factory emigration from China since long before Washington’s tariffs were a factor. Minimum hourly wages in the major factory hubs of Guangdong province rose from Rmb4.12 in 2008 to Rmb14.4 ($2.00) last year. Manufacturers, particularly low value-added ones like textile factories, have sought even cheaper labor in Southeast Asian countries, like Vietnam and Malaysia.