From the trenches of the Trump Trade wars.
I have been in manufacturing since 1981. Since about 2000, I have been purchasing some fabricated parts from China. Most of the items I buy from China then and now, I have made or still make a portion of in-house.
When I first considered purchasing from China, my only considerations were machine capacities and physical warehouse space. In the short term, it is much easier to job out a shortage in production then to buy a machine, train a worker and find the space to house both. So, I quoted several items that I needed in the US and abroad.
Just a quick aside. Adding a machine and an employee, should be easy but it is not. There are so many regulations. Example: Where I was located, I couldn't "legally" do either. The parking and bathroom facilitates in my building only allowed for 8 employees, and I was already fudging that, so it was a risk to add another worker. And the electrical power in my building, in reality, was more than sufficient but it didn't meet the city standards. The City requires that you have to be able to run 100 percent of machines, at 100 percent load, 100 percent fo the time, which would never ever happen and if it did, you would kick a breaker, no big deal. so the City won't allow another machine. You can lie about the amperage of each machine, but if the inspector is a jerk, they will check the label on each machine. And there is more but you get the point . . . that the regulatory state is a burden that is not legally easy to get around.
Back to trade and my experience quoting parts in China . . . The very first thing I discovered was the pricing I got from China were unbelievably similar in two aspects. One, the prices were very close between Chinese companies. The price didn't vary hardly at all, no matter the size of the company or their location. Second, the prices were almost to the penny, what it would cost me to make the same parts in my factory. I immediately realized that those two facts were no coincidences. China was quoting what it cost to make the same part in the USA. They know exactly our cost and they know to be just under that price to get the work. It makes sense and it is almost axiomatic.
So, when ever my machines are at capacity or behind schedule. I consider buying from China.
Trump, who I really like, hit my industry pretty hard with 25 percent tariffs. So I used that in negotiating new pricing with my Chinese partners. I told them that I can't eat the whole amount, and we negotiated a shared percentage of the tariffs. They aggreed to a temporary price reduction of 15 percent, with almost no arguments. The end effect is a 7.5 percent increase in my cost, as the original duty was 2.5%.
As far as quality of parts issues. The quality is not quite as good in China to begin with. But when you make the same parts over and over they get it and the quality gets there eventually. In the mean time, I don't pay for bad parts, and my Chinese partners never question me, they just give me credit or new parts. The fact that they never question me, tells me that their profit margin is very high!
Bottom line, the 25% tariff has added about 1.5% to my finished goods. Pretty easy for me to offset in various different ways, but not that easy for China to offset! I think that my experience is somewhat typical for small manufactures and is much better for large ones. Go TRUMP!
I have been in manufacturing since 1981. Since about 2000, I have been purchasing some fabricated parts from China. Most of the items I buy from China then and now, I have made or still make a portion of in-house.
When I first considered purchasing from China, my only considerations were machine capacities and physical warehouse space. In the short term, it is much easier to job out a shortage in production then to buy a machine, train a worker and find the space to house both. So, I quoted several items that I needed in the US and abroad.
Just a quick aside. Adding a machine and an employee, should be easy but it is not. There are so many regulations. Example: Where I was located, I couldn't "legally" do either. The parking and bathroom facilitates in my building only allowed for 8 employees, and I was already fudging that, so it was a risk to add another worker. And the electrical power in my building, in reality, was more than sufficient but it didn't meet the city standards. The City requires that you have to be able to run 100 percent of machines, at 100 percent load, 100 percent fo the time, which would never ever happen and if it did, you would kick a breaker, no big deal. so the City won't allow another machine. You can lie about the amperage of each machine, but if the inspector is a jerk, they will check the label on each machine. And there is more but you get the point . . . that the regulatory state is a burden that is not legally easy to get around.
Back to trade and my experience quoting parts in China . . . The very first thing I discovered was the pricing I got from China were unbelievably similar in two aspects. One, the prices were very close between Chinese companies. The price didn't vary hardly at all, no matter the size of the company or their location. Second, the prices were almost to the penny, what it would cost me to make the same parts in my factory. I immediately realized that those two facts were no coincidences. China was quoting what it cost to make the same part in the USA. They know exactly our cost and they know to be just under that price to get the work. It makes sense and it is almost axiomatic.
So, when ever my machines are at capacity or behind schedule. I consider buying from China.
Trump, who I really like, hit my industry pretty hard with 25 percent tariffs. So I used that in negotiating new pricing with my Chinese partners. I told them that I can't eat the whole amount, and we negotiated a shared percentage of the tariffs. They aggreed to a temporary price reduction of 15 percent, with almost no arguments. The end effect is a 7.5 percent increase in my cost, as the original duty was 2.5%.
As far as quality of parts issues. The quality is not quite as good in China to begin with. But when you make the same parts over and over they get it and the quality gets there eventually. In the mean time, I don't pay for bad parts, and my Chinese partners never question me, they just give me credit or new parts. The fact that they never question me, tells me that their profit margin is very high!
Bottom line, the 25% tariff has added about 1.5% to my finished goods. Pretty easy for me to offset in various different ways, but not that easy for China to offset! I think that my experience is somewhat typical for small manufactures and is much better for large ones. Go TRUMP!