China Tariffs Eating Your Profits?
When faced with the choice of paying China tariffs or having your operations close to home in North America, NovaLink believes that manufacturing in Mexico is the obvious, and best, choice.
Since July of this year, the United States has imposed a 25 percent border tax on goods made from factories in China when they’re imported into the US. The goal of this tax, and the other China tariffs, is to make Chinese products more expensive for American consumers and businesses to buy.
If your company is currently manufacturing goods in China, your goods will be subject to a 25 percent border tax, which will mean you will either have to raise the price of your goods and pass the expense to your customers or accept a cut into your profit margins.
However, there is viable solution for companies who may be facing the China tariffs crisis: Move your company’s manufacturing to Mexico.
With the new trade agreements between Mexico, Canada and the United States now in place, manufacturing goods and services between these nations is now easier and more cost effective than ever:
- There are no tariffs for products made in Mexico and imported into the United States that meet NAFTA rules of origin requirements.
- Lower shipping time for goods to get into the United States
- Lower average cost of shipping
- Lower number of days to start manufacturing operations
- Cost-effective ad more productive labor pool
Made in China Myths
Select any of the facts below to learn the truth about manufacturing in China.
Chinese Labor is Cheaper
In 2000, workers in Mexico’s manufacturing sector earned nearly 60% more than their Chinese counterparts, according to the Boston Consulting Group. Now they earn 11% less.Details
Chinese Facilities are Cheaper
Facilities in China have become so expensive that in 2015 a Chinese Business Group opened an industrial park in Mexico rather than their own country.Details
Chinese Labor is More Productive
“Mexico has continued to stay more productive than China per worker,” Justin Rose, a partner at Boston Consulting Group in Chicago, told Quartz. “Sometime in 2011 or 2012, from a labor-cost perspective, it became cheaper to put manufacturing capacity in Mexico than in China.”Details