With Tariffs Eating Into Profits, Some Asian Companies Moving Home

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Asian Companies are moving back to their homes from china with increasingly cutting in profits. It is mostly in the electrical and machinery sectors. Some companies in Asia are moving away from china where their factories located.

This trend is moving production back to home is mostly seen in Japan and Taiwan. These Asian Companies are moving to home to avoid higher United States traffics on imports from China. The Nomura analysis found about 56 companies moving back to home.

U.S and China are in an extensive and harsh trade war over a year. Both the sides have imposed several rounds of retaliatory tariffs on billions of dollars worth goods of each other. The two countries have a new series of duties in each other on Sunday. Taiwan became a “big beneficiary” of companies shifting production back to their home base as the result of the trade conflict.

Asian Companies Moving production back

A reporter from Nomura report visited Taiwan’s Ministry of Economic Affairs this week.  He said hat around 40 Taiwanese companies are looking to shift production back to Taiwan from China.

Taipei is promoting the “Invest Taiwan” program that aims to attract companies back home. Under this program, the companies can apply low-cost loans to covers the costs of relocation.

Asian Companies Moving Home From China

Taiwanese circuit board makers Flexium and Quanta computers are moving production back to home. SK Hynix, the world’s second-largest chip makers are also trying to move production of specific chip modules. These are the two largest Asian Companies looking to move back their production.

Coming to Japanese Companies, Mitsubishi Electric is shifting production of its U.S bound machine tools from its manufacturing base in Dalian, China to Nagoya in Japan. China Wants To Resolve Trade War With the United States, but that has not happened.

Machine makers Toshiba Machine and Komatsu are also planning similar moves according to Nomura mentions in The Japan Times and The Asahi Shimbun, respectively. These trades are consistent because of recent export discrepancy seen within Asia, which is a result of a trade war.

Tariffs Eating Into Profits Companies Moving Home

Companies like Dell, who are already concerned about rising labour cost in China, are also looking moving home. They took the opportunity from the fallout of trade dispute to increase the move of production away from China.

The United States and Taiwanese companies make up more than half of the companies that are planning to move home. These Asian companies are seeing an opportunity to relocate production from China.

Also, U.S President Donald Trump demanded the Americans to move away from production out of China. On August 23rd, he made a tweet “immediately start looking for an alternative to china” as order and make their products at home instead. The details about Asian companies relocation from china has many other reasons along with trade war shown as a reason.

The threes sectors that are dominating to move the location out of china are Electronics, shoes and bags and electrical equipment. The Nomura report says that it is not just a short-term trade division, but medium-term production relocations have also started.

It is not only the tariff, but that is also the reason for this relocation of Asian Companies. The rising trade tensions and need to reduce risk are the key reason for production relocation away from China.

Beneficiaries from trade war

The economies benefited because of this trade war are mainly in Asia, with Vietnam, Taiwan and Thailand are dominating. Outside of the Asian countries that Mexico is a standout.

Vietnam is the only economy that attracted companies from both low and high-value industries.  It attracts from garments, consumer durables to electronics. The benefit of Mexico is mainly in electronics and electrical equipment sectors.

Despite all the locations, massive china market is still a force to calculate with given china’s large domestic market size and limited capacity. Elsewhere there are many other reasons for companies to maintain a large part of production in China.

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