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Chinese companies flee overseas to escape Donald Trump's tariffs

Supply chains have already begun relocating out of China in recent years as its rising labour and environmental protection costs have made the country less attractive

AFP/PTI  |  Beijing 

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A growing number of are adopting a crafty way to evade US Donald Trump's tariffs: remove the "Made in China" label by shifting production to countries such as Vietnam, and

The world's two largest economies have been locked in a months-long trade fight after Trump imposed 25 per cent on USD 50 billion worth of Chinese goods this summer, triggering a swift tit-for-tat response from

Chinese factories making everything from bikes to tyres, and textiles are moving assembly lines abroad to skirt higher customs taxes on their exports to the and elsewhere, according to public filings.

Hl Corp, a Shenzhen-listed bike parts maker, made clear to investors last month that tariffs were in mind when it decided to move production to

The factory will "reduce and evade" the impact of tariffs, management wrote, noting Trump hit in August, with new border taxes planned for bicycles and their parts.

Trump warned last week those tariffs - targeting USD 200 billion in - could come "very soon".

"It's inevitable that the new duties will lead to review their globally - overnight they will become 25 per cent less competitive than they were," said Christopher Rogers, a supply chain expert at trade data firm Panjiva.

have already begun relocating out of in recent years as its rising labour and environmental protection costs have made the country less attractive.

Tariffs are adding fuel to the fire, experts and say.

"China-US trade frictions are accelerating the trend of the global value chain changing shape," said Cui Fan, at the Society of WTO Studies, a think tank affiliated with the commerce ministry.

"The shifting abroad of labour-intensive assembly could bring unemployment problems and this needs to be closely watched," Cui said, adding the shift would not help the US's overall trade deficit.

The growing list of foreign firms moving away from - toy company Hasbro, Olympus, shoe brands and Steve Madden, among many others - already has worried.

Less discussed are the Chinese factories doing the same.

Hailide New Material ships much of its industrial yarns, tyre cord fabric, and from its plant in eastern province to the US and other countries.

Trump's first wave of tariffs on USD 50 billion in goods this summer hit some of its exports; the next round of USD 200 billion looks like it will hit several more.

"Currently all of our company's production is in China. To better evade the risks of anti-dumping cases and hikes, our company has after lengthy investigation decided to set up a factory in Vietnam," executives told investors last month.

"We hope to speed up its construction, and hope in the future it can handle production for the American market," a company vice said of the USD 155 million investment that will ramp up production by 50 per cent.

Other moves abroad spurred on by risks include a garment maker going to Myanmar, a mattress company opening a plant in and an acquiring a Mexico-based factory, according to public filings from the firms.

is relying mostly on low cost credit to build a USD 994 million plant in

The entire tyre industry faces a "grim trade friction situation", Linglong told investors last month, citing "one after another" anti-dumping cases against China. "Building a factory abroad allows 'indirect growth,' by evading trade barriers."

China's bike industry faces a similar pivotal moment. The centre of will shift away from China in the future, told investors when announcing its factory.

Some of Hl's customers started moving production - especially of - to Vietnam, said Alex Lee, in charge of global sales at Hl Corp.

"First of all there is no anti-dumping tax on Vietnam," said, adding labour costs were lower there as well.

China's growing industry faces duties not only from the US but also the European Union, which slapped provisional anti-dumping tariffs of 22 to 84 per cent on Chinese-made in July, alleging benefited from cut-rate aluminium and other state subsidies.

The state support receive is key to the Trump administration's case in taxing Chinese goods, but Hl shows how companies may continue to benefit even after shifting some of their production overseas.

Government subsidies, including millions of yuan to "enhance company competitiveness", eclipsed H1's profit during the first six months of the year, its filings show.

Still the company went ahead and bought an operating factory in noted they had transferred mass production of aluminium forks and steering parts to the new plant from their factory in

He did not know if it would lead to job cuts in China.

First Published: Tue, September 11 2018. 17:00 IST
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