TRADING ON TODAY’S TRADE ISSUES – INTERNATIONAL

For the past few months, China and the U.S. have been at issue over how trade between the two countries should be carried out.

During the past decade, and more, the U.S. has gotten the “short end of the stick” when it comes to trade with China – and no federal administration has had the courage, until recently, to “call” the Chinese on the advantages that they took, as well as those that they were “given,” as a result of lack of courage by the politicians in power at the time to ensure that things were decided in equal favor between the U.S. and China.

As I say, until now.  We talked on Wednesdaey about the current realities of U.S. companies doing business in China and the large numbers of companies who have been in the process of pulling up stakes, either partially or fully, and moving manufacturing operations and other functions back to the U.S.  As a further result of the current “trade tensions” between the two countries, even more U.S. businesses, who believe they can’t operate properly without employing extraordinarily cheap labor to do their work for them, have come to the decision, prompted by the ever-increasing wage demands in China as well as other current, unresolved issues, to move operations to other countries.  Thus, in addition to the obvious beneficiaries of the current trade talks with China, there are also benefits to Southeast Asian countries such as Vietnam, Indonesia, the Philippines. Shifting operations to these countries allows the U.S. companies to avoid tariffs that are currently being extracted on goods produced in China and shipped to the U.S. for sale.  For example, Steve Madden’s CEO, Edward Rosenfeld, has said that the company is “aggressively shifting production out of China to other countries, primarily Cambodia” with plans to produce 40-50% of goods outside of China, compared to 16% in 2018.  Of course, the reality is that the same cycle of increasing wages will begin in those newly established countries, but, it will be a while.  If the companies that are doing the jockeying around were smarter, they would be looking at real and significant ways to move their production back to the U.S., using U.S. labor and taking advantage of touting that fact.  U.S. companies have become so enamored with scuttling around after cheap labor that they’ve actually forgotten how to manage businesses, overall.  It’s the all the moving parts principle – labor and employees is only one of all those parts that make it all work together.

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