Donald Trump’s four years in power have ‘totally changed manufacturing’, say US firms forced to rethink supply chains

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When Donald Trump was elected US President in 2016, almost all of M Group Corporation’s high-end hotel furniture fittings were made in China.

Now, after four years of being pummelled by anti-dumping duties, tariffs and extreme political volatility, about 50 per cent is made in China, with the balance of production scattered around Vietnam, Malaysia and Eastern Europe.

“We eventually came up with a solution, and the only real winner was my frequent flier programme,” said the American company’s president H. David Murray. “My eldest son and I travelled just about all over the world to find resources.”

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First Trump slapped 341 per cent anti-dumping duties on Chinese-made quartz worktops, then followed up with tariffs and duties on millwork cabinets, vanity bases, kitchen cabinets and headboards.

“All that stuff came under assault from anti-dumping, because the political climate in the United States is really good for that right now,” Murray said.

The businessman said he would prefer to keep production in China because none of the alternatives can compete on price, speed, scale or quality. But should the trade war continue beyond November’s US election, he might be forced to leave the world’s workshop for good – although he is unlikely to bring many jobs home.

“A lot of furniture for the hotel business used to be made in the state of North Carolina, but that was 20 years ago,” he said. “If the state offered me US$5 million of grants to open up a factory in North Carolina today, the worker that I’d find would be 68-70 years old because they had the skill set.

“Then there’s the supply chain: who makes the hinges, or the boxes, the finishes? It would take me three to five years if I were the best in the business to be competitive, but even then my costs would be twice as high as a Chinese or Vietnamese supplier.”

Murray’s manufacturing business is one of many that has been turned upside down in four roller-coaster years of Trump, who has vowed to be tough on China and drive American companies out of the mainland.

Now, with Democratic challenger Joe Biden taking up similar China trade policies, many businesses are expecting tumultuous times ahead regardless of who wins the election.

“If it had not been for the tariffs, I would still be in China now,” said Larry Sloven, who spent a number of years planning to move LED light company Capstone International from China to Thailand.

Production was shifted just before the coronavirus pandemic put the brakes on travel this year and Sloven has not looked back.

“It has not been a cakewalk, and the biggest challenge is the supply chain,” he said. “All the components, batteries, chips, resistors, cables – they all still come from China, but the value is added here in Thailand and we are now shipping cargo to the US.

Trump has totally changed so many people’s lives – he has totally changed manufacturing

Larry Sloven

“But the people who didn’t move now are stuck, and no matter who is the next president, the tariffs aren’t going away.”

Sloven said the 25 per cent tariffs added to his products in the trade war made them too expensive for US buyers. It forced him into a change that may have come further down the line as labour costs continued creeping up in China, but “as soon as the tariffs dropped I pulled the trigger”.

“Trump has totally changed so many people’s lives – he has totally changed manufacturing,” Sloven said from his factory west of Bangkok.

Businesspeople often say that in purely commercial terms, China is hard to leave because of the infrastructure, supply chain and skilled workforce.

A recent survey by the American Chamber of Commerce in Shanghai found that despite pressure from Trump, 92.1 per cent of members had no plans to exit China, with 70.6 per cent saying they had no intention of changing production allocation, up 5.1 per cent on last year.

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“China is still the easiest place in the world to do business – it’s a huge big box retail store, you can get anything in your supply chain, your parts, your raw materials – they are all easily obtainable, but if you try to do that same model in Vietnam, Malaysia or Indonesia, the expertise is not there, the experience is not there,” said Murray at M Group.

But whereas AmCham members tend to be long-term residents of China committed to selling to its giant consumer market, many firms involved in outsource manufacturing have been wondering for much of Trump’s first term if it is cheaper and politically safer to leave.

Sometimes, their decisions can be influenced by consumer demands in the US, with a September study by Pew Research finding that 78 per cent of Americans now hold an unfavourable view of China, a 15-year high.

“For all commodities outside electrical and electronics, customers are actively looking for a non-China option,” said Hiten Shah, president of sourcing company MES Inc.

They were worried about tariffs last year but now they are worried about possible military conflicts and rapidly deteriorating decoupling between two nations

Hiten Shah

“They were worried about tariffs last year but now they are worried about possible military conflicts and rapidly deteriorating decoupling between two nations.”

A year ago, Kent International was one of those firms thinking of moving from China. The company’s bicycles – sold in big US retailers like Walmart – had been hammered with trade war tariffs, and its Chinese manufacturing partner had invested US$10 million in a giant manufacturing site in Cambodia.

But the plans to move to Cambodia fell through and the company was thrown a lifeline just before the pandemic hit, when many of its products received tariff exemptions, said the firm’s CEO Arnold Kamler.

“It was somewhere between 40 to 50 per cent of the items that we were importing did get excluded. Plus, we were able to file for refunds on the tariffs – we had paid them for a year and a half previously – so that was a nice benefit to us,” he said.

His manufacturing partner is Shanghai General Sports, a family business managed by Ge Lei, who said he dropped his Cambodia plans in favour of a Malaysian plant that would be operating by now if the pandemic had not prevented him from sending staff to test equipment.

For us to formulate a strategy we need to have some certainty and there is no certainty under Trump

Arnold Kamler

The plant has the capacity to churn out up to 600,000 bikes a year, and would be an insurance policy against future tariffs, even if the bikes cost 15 per cent more to make in Malaysia because parts need to be shipped from China.

“In general I don’t think another four years under Trump is good for my business because his policies are too unstable,” Ge said. “For factory men like us, bad policies like tariffs are OK – we can move manufacturing to other countries. But Trump’s policy is one thing today, another tomorrow. Our investment could be down the drain.”

While Kent International has avoided the worst of direct import tariffs and seen bicycle sales soar through the pandemic, thanks to demand for transport that lends itself to social distancing, Kamler has also had enough of Trump’s volatility.

He plans to bring a large portion of manufacturing back to South Carolina, but has struggled due to the difficulty and expense of sourcing parts.

“If we could get the volume high enough, then we could seriously consider starting to make the frames from scratch in the United States,” Kamler said. “But I need certainty. And I don’t care if the tariffs are zero, or they’re 50 per cent. For us to formulate a strategy we need to have some certainty and there is no certainty under Trump.”

Additional reporting by Sidney Leng.

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