US-China Trade War Is Good News for Some Countries
As with any war, there are winners and losers. That is also the case with the trade war between China and the United States.
As the two sides battle, companies affected by high tariffs are looking to manufacture their products elsewhere. So businesses operating in other countries are experiencing economic growth.
Two factories in Vietnam manufacture electric bicycles for Pedego, an American company based in California. About 80 percent of Pedego's bicycle parts once came from China, but not anymore.
"Now, we're probably 70 percent in Vietnam, and 30 percent in Taiwan," said Don DiCostanzo. He is a co-founder of the company and its chief executive officer.
Shift to Vietnam
In February 2018, DiCostanzo decided to move production to Vietnam because of the threat of high European Union tariffs on Chinese-made electric bikes. Production in Vietnam started seven months later, in September. That was the same month the U.S government ordered tariffs on Chinese-made products that included electric bikes.
"We then were immediately able to accelerate that production," DiCostanza said. "And we began producing bikes in Vietnam for this country (the U.S.) in September right after the tariffs went in place, and by Jan. 1, (2019), we eliminated all production in China and managed to move all of our production...to Vietnam."
By the beginning of 2019, the factories in Vietnam were producing bicycles for Pedego. While some parts are still coming from China, DiCostanzo kept looking in other countries for those parts. In time, Pedego's need for Chinese-manufactured parts slowly decreased.
Trade war helps Vietnam and Mexico
Pedego is not the only company moving manufacturing away from China because of the trade war.
The U.S.-based company GoPro moved production of cameras for the American market from China to Mexico in June. GoPro said it made the move because of "possible tariffs as well as recognize some cost savings and efficiencies."
GoPro's cameras for markets other than the United States continue to be made in China.
"The two countries that are benefiting the most are Vietnam and Mexico...And everybody else is looking at them with envy," said Kevin Klowden. He heads the Center for Regional Economics at the Milken Institute, a research center based in Santa Monica, California.
The U.S. Census Bureau reports that goods imported from Mexico increased by more than 6 percent for the first six months of 2019, compared to the same time in 2018. It said imports from Vietnam during that same period rose by more than 33 percent. Chinese imports for the same period decreased by more than 12 percent.
"The Vietnamese government has done a (great) job of making themselves ready and available...as a direct competitor to China for a while, particularly on cost," Klowden said.
DiCostanzo said he found the quality of products from Vietnam was better than those from China.
Return manufacturing to US
Manufacturing and outsourcing products in a worldwide economy is a tricky business, however. Unusual weather, political unrest or even the appearance of a less costly competitor can cause businesses to turn to a different manufacturer.
"Manufacturing has shown itself to be mobile in a way that we never could have imagined years ago," Klowden said.
Some companies in the United States, such as Pedego, would like to manufacture their products in a U.S. community some day.
"A number of companies would like to move manufacturing back to the U.S. just...because of stability. (But) manufacturing that moves back to the U.S. employs...fewer people than it would have 20, 30 years ago," Klowden explained.
Any business that manufactures in the U.S. and can successfully compete in the current economy would use robots.
"These robots, you don't have to pay them overtime, and they don't have to take time off, and they work 24/7," Pedego's DiCostanzo said.
I'm Susan Shand.