(Reuters) – U.S. manufacturers are accelerating their shift out of China, coming to terms with a new reality: the Trump administration\u2019s tariffs will not go away any time soon. <\/p>\n
FILE PHOTO: Words ‘Made in China’ are pictured on a box of products imported from China at a wholesale shop in Paris, France. REUTERS\/Regis Duvignau\/File Photo<\/span><\/p>\n<\/figcaption><\/div>\n<\/div>\n President Donald Trump\u2019s lead trade negotiator, Robert Lighthizer, warned lawmakers on Wednesday that the United States would need to keep the threat of stiff tariffs on China in place for years, even if a trade deal is inked, as part of an enforcement mechanism that would include frequent reviews of whether China was abiding by any agreement. <\/p>\n That confirms what many companies have already concluded. Even if the hot phase of this trade war passes, tensions will linger and continue to reshape the economic relationship between the world\u2019s two largest economies. <\/p>\n \u201cAs you look at the way these negotiations are shaping up, you must certainly think: not only will it take a while for the talks to reach their full conclusion, but there\u2019s going to be enforcement mechanisms,\u201d said Steve Lamar, executive vice president of the American Apparel and Footwear Association. \u201cI would imagine punitive tariffs are going to be with us for a while.\u201d <\/p>\n Apparel and footwear manufacturers have been shifting their production mix to factories in other countries like Vietnam, Indonesia and Egypt for much of the past decade, but the push has intensified due to the trade war, Lamar said. The United States has not hit most finished apparel and footwear with punitive tariffs, but \u201ceven if the threat (of more tariffs) never materializes and it\u2019s always out there, who wants to live with that threat?\u201d he said. <\/p>\n It will take years, however, for large manufacturers and retailers to build new supply networks. Many companies have held off raising prices to offset tariffs, in hope that they would go away. <\/p>\n As it becomes clear that the risk of tariffs will linger, more companies are taking steps to mitigate them and accepting trade conflict with China as a new fact of life, according to businesses and trade groups interviewed by Reuters. <\/p>\n One company already moving some production out of China is Bissell Inc., the vacuum maker. CEO Mark Bissell said long before tariffs, he was looking for alternatives due to rising costs in China. <\/p>\n Tariffs, he said, are the \u201cburning platform\u201d forcing him to jump. Bissell expects to have some of the company\u2019s China production shifted to Vietnam, Malaysia and Mexico by the end of the year, and said Lighthizer\u2019s comments confirm what he was already doing. <\/p>\n \u201cThe geopolitical issues between the two countries will continue to be large and with so much at stake, the relationship will be touchy going forward,\u201d Bissell said in an email. \u201cDiversifying the supply chain makes continued sense and I don\u2019t see a reversal of course.\u201d <\/p>\n Jacob Parker, vice president of China operations at the U.S.-China Business Council in Beijing, said even in the event of a trade deal, it was possible the persistent threat of tariffs would continue to push U.S. companies\u2019 supply chains out of the country. Similarly, Chinese firms are likely reconsidering their reliance on U.S. companies, he told Reuters. <\/p>\n It remains unclear whether the United States will prevail in its trade war against China. Lighthizer, testifying to the U.S. House Ways and Means Committee, said a great deal of work remains to hammer out a deal, including agreeing on how it would be enforced. <\/p>\n Many companies are stuck in a wait-and-see mode, but the realization that there will not be a quick fix is growing. <\/p>\n \u201cThe longer it goes on, the more likely (the China trade battle) becomes more permanent,\u201d said Todd Stucke, senior vice president of marketing, product support and strategic projects at Kubota Tractor Corp., the U.S. arm of Japanese tractor maker Kubota Corp. \u201cI\u2019m hoping it doesn\u2019t.\u201d <\/p>\n Shifting supply chains is no small task for companies that have spent years investing in countries like China, said the apparel and footwear group\u2019s Lamar. <\/p>\n On Thursday, shoemaker Crocs Inc highlighted the threat of the Trump Administration\u2019s trade policy changes, especially the tariffs. <\/p>\n \u201cIt may be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with any such changes,\u201d the company said. <\/p>\n Some companies are resorting to the price hikes they have been delaying. Kubota held off raising prices until now in hopes that the costs associated with tariffs – including higher prices for imported parts from China – would be short-lived. Kubota has 10 U.S. factories, with seven in Kansas. Its business has been hammered by retaliatory tariffs on U.S. farmers, said Stucke. <\/p>\n \u201cWe held out as long as we could,\u201d he said. The company is implementing across-the-board price increases of 1 to 5 percent, depending on the item, as of Friday. <\/p>\n Reporting by Timothy Aeppel and Chris Prentice in New York; Additional reporting by Michael Martina in Beijing; Editing by Dan Grebler<\/p>\n<\/div>\n<\/div>\n\u2018BURNING PLATFORM\u2019 <\/h3>\n
NO EASY SHIFT <\/h3>\n