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Trump Promises Not Kept As Manufacturing Fails To Return To US (#GotBitcoin?)

The A.T. Kearney analysis suggests manufacturing moved from China to other Asian countries as tariffs rose last year. Trump Promises Not Kept As Manufacturing Fails To Return To US (#GotBitcoin?)

For those companies that are looking at bringing manufacturing back to the U.S., Mr. Sutherland said those efforts tend to focus on precision manufacturing and operations, where automation and technology help reduce the higher cost of domestic labor.

American trade policies aimed in part at returning factory work to the U.S. appear instead to be accelerating a shift in production from China to Vietnam and other low-cost nations, according to a report released Wednesday.

Despite escalating tariffs between the U.S. and China, American imports of manufactured goods from China and 13 other Asian countries rose 9% in 2018 to $816 billion, the largest annual increase in nearly a decade and outpacing a 6% increase in domestic manufacturing gross output, according to consulting firm A.T. Kearney Inc.

The firm said its annual index measuring the ratio of U.S. imports of Asian-made goods as a percentage of domestic manufacturing output reached 13.1% in 2018, up from 12.7% in 2017 and the highest A.T. Kearney has found in the past 10 years.

“The trade war has not supported reshoring,” said Johan Gott, a principal at A.T. Kearney and a co-author of the report.

“What we do see is a sort of China diversification,” he said, as companies look to reduce their exposure to trade tensions, rising Chinese labor costs and other risks.

Some American companies have halted or delayed plans to expand domestic plants as tariffs on Chinese imports increase the cost of products from bicycle parts to the components used to assemble loudspeakers.

Others are reshaping their supply chains, moving some production to Vietnam, the Philippines, Cambodia and India. Such shifts can take months and sometimes lead to logistics bottlenecks and other complications. Although labor tends to be cheaper in other parts of Southeast Asia, logistics infrastructure and factory capacity often aren’t as well-developed as in China.

The report said China remains the largest source of U.S. imports among Asian countries, accounting for nearly two thirds of the $816 billion total. But its share has been falling in recent quarters as U.S. companies stockpiled Chinese imports late last year ahead of anticipated levies and as some businesses sped up the movement of manufacturing to lower-cost Asian countries such as Vietnam.

Five years ago, China accounted for 69% of U.S. imports from those countries, Mr. Gott said.

In the first quarter of 2019, that share dipped to 60% from 65% in the prior quarter. The long-term decrease, from the fourth quarter of 2013 to the first quarter of 2019, is equivalent to a loss of $72 billion in import value, the report said, more than the total value of 2018 imports from India, which at $51 billion had the second largest share of imports to the U.S.

Mexico also has benefited from the U.S.-China trade fight, increasing its exports to the U.S. by $28 billion last year, a 10% jump from 2017, according to the report.

“More companies are getting smart and they are moving production to Mexico,” said Joel Sutherland, managing director of the Supply Chain Management Institute at the University of San Diego School of Business and a director of the Reshoring Institute, a nonprofit that supports expansion of U.S. manufacturing. Trump Promises Not Kept,Trump Promises Not Kept,Trump Promises Not Kept,Trump Promises Not Kept, Trump Promises Not Kept

U.S. manufacturers are shifting production to countries outside of China as trade tensions between the world’s two biggest economies stretch into a second year.

Companies that make Crocs shoes, Yeti beer coolers, Roomba vacuums and GoPro cameras are producing goods in other countries to avoid U.S. tariffs of up to 25% on some $250 billion worth of imports from China. Apple Inc. also is considering shifting final assembly of some of its devices out of China to avoid U.S. tariffs.

Furniture-maker Lovesac Co. is making about 60% of its furniture in China, down from 75% at the start of the year. “We have been shifting production to Vietnam very aggressively,” said Shawn Nelson, chief executive of the Stamford, Conn., company. Mr. Nelson said he plans to have no production in China by the end of next year.

The moves by U.S. companies add up to a reordering of global manufacturing supply chains as they prepare for an extended period of uneven trade relations. Executives at companies that are moving operations outside China said they expect to keep them that way because of the time and money invested in setting up new facilities and shifting shipping arrangements.

Companies said the shifts accelerated after the tariff on many Chinese imports rose to 25% from 10% in May.

“Once you move, you don’t go back,” Mr. Nelson said.

Yeti Holdings Inc. said it plans to move most production of soft-sided coolers out of China by the end of this year. iRobot Corp. said it would start producing Roombas in Malaysia this year, too. Crocs Inc. said it expects less than 10% of U.S.-bound products to be made in China by next year, down from 30% in June. And diesel-engine maker Cummins Inc. said it has avoided $50 million in tariff expenses by moving some production to the U.K. and other countries.

Imports from China fell 12% in the year through May compared with a year earlier, according to the U.S. Census Bureau, the biggest decline since the financial crisis a decade ago.

The biggest beneficiaries of that decline have been other countries in Asia where production costs are low, such as Vietnam, India, Taiwan and Malaysia. Many of those countries have seen sharp increases in exports, although there have been allegations that some of that added traffic was due to goods made in China that were routed through those countries without significantly altering them to avoid tariffs.

U.S. imports from Vietnam are expected to reach $64.8 billion this year, up 36% from 2018, according to consulting firm A.T. Kearney.

“We’re moving production to other parts of the world,” Marvin Edwards, chief executive of CommScope Holding Co., said in June. The Hickory, N.C., company is making antennas for sale in the U.S. at its plant in India instead of China.

There is little evidence, though, of U.S. manufacturers bringing production from China back to the U.S., a move the Trump administration hoped the tariffs would encourage.

While imports from other Asian countries have climbed, U.S. manufacturing output has declined 1.5% through May from a recent peak reached in December, according to the Federal Reserve. The Institute for Supply Management said earlier this month that its manufacturing index slipped again in June to the lowest level since 2016.

If we were to try to do a factory in the U.S., it would be enormously expensive,” said John Hoge, co-owner of Sea Eagle Boats Inc., which makes 85% of its inflatable kayaks, canoes and fishing boats through contract manufacturers in China. Mr. Hoge said the network of manufacturers and suppliers in China that makes boats for Sea Eagle and many of its competitors isn’t as comprehensive in any other country.

“It took us 20 years to build up the supply chain in China,” he said. Mr. Hoge estimated the 25% duty on his products that took effect in May would double the Port Jefferson, N.Y., company’s tariff expenses to about $500,000 a year.

Crown Crafts Inc. analyzed manufacturing costs in a half-dozen countries before deciding to keep making its baby blankets in China despite the tariff costs.

“It’s very difficult to find a country that can do it competitive with China,” Randall Chestnut, chief executive of the Louisiana company, told analysts in June.

More than 100 companies have asked the Commerce Department to waive the latest 25% tariff on their imports because they say they can’t find suppliers outside of China.

One is Zoom Telephonics Inc., which said it lost $1.1 million during the first quarter and likely more in the second as a result of the tariffs on the cable-TV modems it imports from China and sells through Amazon.com Inc., Best Buy and other retailers.

“I don’t think anybody makes them in the U.S.,” Frank Manning, chief executive of the Boston-based company, said in an interview. “We’re bleeding.”

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