Before Donald Trump even assumed the presidency with his strong focus on tariffs, major corporations were already accelerating their plans to relocate production outside of China, a recent report reveals.
A survey conducted by Bain & Company, which included responses from 166 CEOs and COOs, indicated that the percentage of businesses shifting operations away from China rose to 69% in 2024 from 55% in 2022.
So, where are these companies headed? The Indian subcontinent emerged as the most popular new base, with 39% of executives planning moves there. This was followed by 16% who chose the U.S. or Canada, 11% opting for Southeast Asia, 10% selecting Western Europe, and 8% choosing Latin America as their top five relocation destinations.
In addition to moving abroad, more companies are also bringing operations back to their home countries, a practice known as “reshoring,” or moving them to nearby countries, known as “near-shoring.” The survey, carried out in July, highlighted that the proportion of executives whose companies have plans to bring supply chains closer to their primary markets surged to 81% this year from 63% in 2022. This includes the growing practice of “split-shoring,” which involves a combination of offshore production and manufacturing near the home base.
Driving Factors Behind Relocation
The study by Bain pointed to increasing geopolitical uncertainties and escalating costs as major drivers behind these shifts. For U.S. firms, which constituted 39% of the survey’s participants, the 2022 Inflation Reduction Act was a significant motivator for reshoring. This act, one of President Joe Biden’s key domestic policies, offers incentives and tax credits particularly in areas like renewable energy technologies. Another initiative under Biden, the CHIPS Act, has further spurred on domestic semiconductor production.
Certainly, a plethora of issues influence a company’s decisions regarding their supply chains. Bain’s 2022 survey revealed that geopolitics, which encompass tariffs, regulations, and inflation, ranked highly among concerns. However, factors like labor conditions, climate and environmental considerations, and risks such as natural disasters, terrorism, and health crises also play crucial roles.
The vulnerability of depending too much on Chinese manufacturing was underscored when Trump imposed tariffs on China during his first term as part of his “America first” economic agenda. The supply chain disruptions experienced during the pandemic further emphasized the need for greater diversification.
Moreover, Biden has maintained Trump’s tariffs on China, implemented restrictions on U.S. investments in China, and promoted increased domestic production. Trump, for his part, has promised to increase tariffs broadly in his second term, including imposing harsher duties on China.
Impact of Trump’s Tariffs on China’s Economy
Raising U.S. tariffs on China could further harm the world’s second-largest economy, already reeling from a real estate downturn, debt problems, and even instances of deflation.
Exports serve as one of the main pillars of China’s economy, although Beijing’s numerous stimulus efforts have shown some success in boosting domestic consumption.
Nevertheless, the influx of inexpensive exports from China has led other nations to set up more trade barriers against Beijing.
Meanwhile, foreign investment in China has seen a decline over the past three years, continuing into the last quarter. Despite China’s endeavors to kickstart growth, foreign investment fell by $13 billion in the first nine months of the year.
Similar Posts
- Mastercard Chair Warns: U.S.-China Tensions May Lead to Deliberate Economic Split!
- SMIC Stock Skyrockets 120% as China Accelerates Semiconductor Self-Reliance Amid Trade War
- Trump’s S&P 500 Scoreboard: Wall Street’s Best Hope for Success
- Taiwan Set to Discuss 2nm Tech Transfer to U.S. After Trump’s Remarks
- Jamie Dimon Rejects Trump Admin Role: “I Haven’t Had a Boss in 25 Years!”
Jamie Prescott specialises in economic journalism, breaking down complex topics like global trade and finance into digestible stories. Jamie helps readers stay informed about the economy and its impact on local communities.
