Editor’s note: The following is an updated version of an article published on the Shoreview Management Advisors website in January 2019.
Trade Deficits and the Potential of Manufacturing Returning to the US Dominate Today’s Headlines
Structural trade deficits are driving the headlines. With “America First” as the justification, the US has imposed steel and aluminum tariffs, and most recently tariffs on potentially $250 billion or even all imports from China. Having built large sourcing infrastructures in China for US marketers and distributors, there are good reasons for the shift in some products from the US to lower cost countries like China. There are also American executives who have moved production from the US to China for other reasons including not clearly understanding their cost structures before and after an anticipated move. There are still other executives who have routinely engaged in this effort intentionally due to less than honorable reasons.
Compelling Reasons to Have Sourced Products From China
Ease of Doing Business Leading to Complacency Over Time
Some Tragic Reasons Why Manufacturing Shifted to China
The ethics of business in China and the US are sometimes very different. We read on a frequent basis about high level government executives being investigated for corruption. This is not confined to the Chinese alone. Many US executives have received personal financial inducements to source their company’s components or products from China. It is widespread in China and far more common than one would like to believe.