How Does the US-China Trade War Affect Importers?

Importers have had a lot to consider lately. With the global pandemic, supply chain changes, safety considerations, and economic hardships, it’s a tough time to be in the import export business. All of these challenges have shifted concerns about the US-China trade war to the background.The trade war began in 2018 as a result of President Trump’s pledge to confront China’s manufacturing dominance and increase American jobs. He used heightened tariffs and other tactics in an attempt to force China to accept a number of demands, including enhancing intellectual property protections. China fought back with retaliatory tariffs.While the full ramifications of the US-China trade war remain to be seen, it’s clear that the economies of both countries have been influenced in significant ways. Of course, this leads to ordinary importers being enormously impacted by the trade war.Whether you’re already an importer or you’re thinking about starting your own import business, it’s wise to consider how the trade war might affect your company. After all, no one knows when or if tariff rates will return to normal.

Is the US-China trade war still happening?

Even though most people think of the trade war as a distinctly Trump-era phenomenon, President Biden has not yet ended the trade tension. The Biden administration is examining the phase one trade deal but has made no move to lower the tariffs.Tariffs remain about at their peak, with US tariffs on Chinese goods at 19.3% and Chinese tariffs on American goods at 20.7%. These tariffs are exponentially higher than they were before the trade war began in 2018, when they were 3.1% and 8.0% respectively.It seems as though US Trade Representative Katherine Tai is open to trade negotiations but reluctant to suddenly reduce tariffs. She believes such a move could harm the US economy.Yes, the US-China trade war is still happening, and it’s causing problems for both the US and China. Importers should be aware of its potential implications on the industry.

The impact of the trade war

While President Trump meant to cripple the Chinese economy while advancing US manufacturing, it seems that his goals were not realized.Instead of floundering under the heavy tariffs, China has increased trade with other nations, most notably the Association of Southeast Asian Nations (ASEAN), which has surpassed the US to become China’s largest trading partner. China has also expanded its trade to Europe and sub-Saharan Africa during the trade war.Due to an overall decline in imports from the US as well as other countries, China’s trade balance has improved significantly. Many Chinese companies are now looking to move their manufacturing to developing economies such as Mexico and India that can serve the US market.On the other hand, the United States economy has greatly suffered from the trade war. Since Chinese manufacturers didn’t lower their prices in response to the tariffs, the burden fell on US companies to pay for the trade war. Increased costs led to huge job losses and wage cuts for American workers. American farmers and manufacturers have also suffered from China’s retaliatory tariffs.Chinese exports to the US decreased by $87 billion from 2018 to 2019 alone. This has led the United States to look elsewhere for its cheap labor and manufacturing needs. The main beneficiaries of this have been Vietnam, Taiwan, and Mexico. Perhaps this is the reason why US manufacturing remained stagnant even with the tariff protections granted by President Trump.

Navigating the trade war as an importer

If you get too far into the political weeds of the trade war, it can be difficult to figure out exactly how it can affect you as an importer. Here are three keys to keep in mind to navigate the trade war.

1. Consider your supply chain

Are you thinking about finding a supplier in China? Now may not be the ideal time for that. Although Chinese manufacturers are still some of the best equipped in the world to produce a wide variety of goods, manufacturers in several emerging markets could be rising up to take their place.

Many American companies are looking to find suppliers in Southeast Asia. Don’t forget to check out which countries the US has a free trade agreement with so you can save on tariffs and speed up the customs process.

2. Take tariffs into account

If you’ve already decided to rely on a Chinese supplier, don’t get blindsided by the hefty tariffs. Do plenty of research in advance so that you can allocate part of your budget to paying these tariffs.

Be prepared for changes as the international atmosphere continues to shift. China is still the top global manufacturer, but there are some up-and-coming markets that might give it a run for its money. At this point, China is still a suitable place for you to find imports, as long as you have the funds to cover the tariffs.

3. Keep an eye on the news

The entire import-export world is waiting to see what will happen with the trade war. Not only are American and Chinese businesses impacted by the trade war, but other nations are being negatively or positively affected as well.

As an importer, it’s extremely important for you to stay informed about international news so that you’re prepared for whatever comes. Keep your ears open and look for opportunities that could come your way with the shifting tides.

Are you feeling overwhelmed by all of the changes in international trade? Let us partner with you to figure out importing and exporting for your business. At BorderBuddy, we offer solutions for businesses of all sizes. Give us a call today!