Executives Say Sourcing Outside China Costs More Than Tariffs

Written by SK Ashby

Trump has boasted that his tariffs on imports from China will push more companies to source their products from other countries, but a large group of companies testified in Washington yesterday where they said they literally can't do that.

Company representatives that spoke to a panel of various federal officials said sourcing some other countries would cost more than simply paying Trump's tariffs while others said they literally can't source their products from other countries because no one else makes their products.

Sourcing from other countries will raise costs, in many cases more than the 25% tariffs, some witnesses told a panel of officials from the U.S. Trade Representative’s office, the Commerce Department, State Department and other federal agencies. [...]

[Dozens] of witnesses in oral and written testimony said that moving operations to Vietnam and other countries would not be feasible for years due to a lack of skills and infrastructure in those locations. China dominates global production in industries from shoes to electronics to port gantry cranes.

That 25% is just going to whack us on the head,” said Rick Helfenbein, president of the American Apparel and Footwear Association. “If we could move more product out of China we would, but we haven’t been able to.

To a certain degree, I feel like this is all missing the point.

Even if American business could flip a switch and source all of their products from other countries tomorrow, what would that solve?

Does it really matter if your shoes and shirts say 'Made in Vietnam' instead of 'Made in China?'

If Trump is waging a trade war for economic reasons, sourcing products from Vietnam instead of China would not fundamentally alter the structure of our economy or reduce our trade deficit. It could even increase our trade deficit as Vietnamese consumers simply do not have the numbers or the purchasing power to match the loss of access to China's middle class which is already larger (400 million) than the entire population of the United States (327 million). Vietnam and other countries cannot buy American goods in large volumes.

Trump's trade war with China has very little if anything to do with economics and I think that's obvious to the rest of the world by now.