Beginning in July of this year, the United States imposed a 25 percent tariff on goods made from factories in China when they’re imported into the US. The goal of this tariff, and other China tariffs, is to enforce more fair trade practices with the US. The end result is products will be more expensive for private and business consumers, as the expense will be passed on to consumers.
For many companies manufacturing goods in China, there are some implications related to the tariff: any of the $200 Billion worth of goods included on the tariff list (ranging from dishwashers to Fitbit fitness trackers to food seasonings) by the United States are subject to the 25 percent tariff tax. (In fact, some companies are even paying up to 40%, for goods such as garment materials.) This will inevitably place some companies in the unfortunate position of having to raise the price of their products to cover the cost of doing business in China.
Fortunately, there is a viable solution for companies who may be facing this China tariffs: Reevaluate your supply chain model by changing your company’s base manufacturing to Mexico.
The new USMCA trade agreement between Mexico, Canada and the United States that is ready to be ratified by the end of this year will provide lower tariff rates and reduced duty rates between the three nations, which in turn will allow manufacturing goods imported between them easier and cost effective. Some other benefits and points to consider:
- There are no tariffs for products made in Mexico and imported into the United States that meet USMCA rules of origin requirements.
- Manufacturing goods in Mexico also means lower shipping time for goods to get into the United States, as well as lower average cost of shipping.
- For companies that are getting established, starting operations in Mexico is almost half the time it takes to begin manufacturing operations in China.
- Mexico, like China, has a highly-skilled and productive labor pool to scale up your operations as needed.
We believe that moving your manufacturing to Mexico is the obvious, and most cost-effective choice for manufacturing companies who may be concerned about the ongoing risks of operating overseas manufacturing. Contact NovaLink today for free consultation how you can change your manufacturing base from China to Mexico easily and seamlessly.