The news late last week of additional tariffs levied by China on $75 billion worth of U.S. goods and a subsequent increase from 25% to 30% in tariffs imposed by the U.S. on Chinese goods is the latest development in the trade war that has already pushed some supply chains out of China and into Southeast Asia. While some manufacturers had already moved to revamp their logistics networks, China-based forwarder Apex Logistics told Air Cargo World the newest round of tariffs will likely push those suppliers who had taken a “wait and see” approach to finally shift their supply chains.
Apex Logistics held a summit in Taiwan during July for large electronic shippers to discuss how the trade war is affecting supply chains out of Asia. One of Apex’s customers is “moving out of China very aggressively and wanted to make sure we have the capacity in place to accommodate that change,” Michael Piza, senior vice president, corporate business development and customs brokerage at Apex Logistics, said.
The forwarder is investing in increasing its capacity out of Taiwan, Thailand and Vietnam, Piza said, but has maintained capacity out of China, as with its regular charters out of Wuhan (WUH) into Columbus (LCK) that began this weekend, operated by Asiana Cargo with a 747-400F. The forwarder is also planning a new charter out of Vietnam for September, but declined to provide additional information on the charter at this time.
Although the trade war has led to an increase in discussion of Vietnam as the new Asian gateway for air cargo, Piza said the shift has been slower than expected, likely because manufacturers in the region have already invested substantial time and capital into their supply chains in China. Apex Logistics said that as of August, there is “still more capacity than demand” out of Vietnam, but the newest tariffs are likely to accelerate the shift. “Now that it’s escalated to this point, you’ll see swifter action over the next coming weeks and months,” he added. “At the summit, a lot of the customers were in ‘wait and see’ mode, but I think that this most recent situation will encourage people to move more quickly.”
The tariffs may be a pitfall for Chinese exports, but the U.S. faces its own, perhaps more serious, challenges, as noted by Dorsey & Whitney senior partner and Asia group co-head Nelson Dong. In a statement on the impact of the tariffs, he noted that “China has the ability through its formal system of state-owned enterprises and its informal system of influencing nominally private enterprises to decrease the imports of certain goods.”
Agricultural products China normally imports from the U.S. have been hit particularly hard, and as Dong said, “there are multiple competitor countries who would eagerly replace American suppliers that have invested years or even decades in establishing their sales channels into China.”
“The longer these tariff wars go on, the more China can be expected to use this ‘power of the purse’ to regulate and influence where China buys such commodities and the greater the danger that such displacements of American suppliers will last beyond the financial endurance of individual farmers or their creditors.”
You can view video of Apex Logistics’ inaugural charter into LCK below: