As the Trump administration imposes tariffs on US$50 billion in Chinese exports to the United States, Ford, the 114-year-old American car maker, was recently forced to cancel a program to sell a Chinese-made small car in the U.S. The future sales price in the United States will be too high because of the higher tariffs and it would be unprofitable to establish a factory in the United States.
At the same time, tech giant Apple Inc. hasn’t responded to Trump’s calling for Apple to make their products in the U.S. instead of China to avoid tariff effects.
These American companies are reluctant to move their production lines back to their homeland, because their products are produced and assembled in China, in order to maximize work efficiency, control costs and achieve greater profitability and development.
As to the automotive industry, China has become the world’s largest car sales market for nine consecutive years. In the first half of this year, China still leads the world in car sales reaching 12.23 million cars. The Ford F-series is the most popular model with nearly 540,000 sales.
No car company could give up such a profitable market. If the US auto companies moved their production lines back to the United States, and China and the United States impose an additional 25% tariff on each other, the price of imported cars would increase by at least 30%.
As for the technology industry, China’s value in the global technology industry chain is rising consistently. In Apple’s list of the world’s top 200 suppliers in 2018, there are 34 suppliers come from Hong Kong and the Chinese mainland.
Lower labor costs, a constantly improving business environment, increasing industry support and labor efficiency are the main considerations for Apple to increase its suppliers in China. If the product manufacturing is transferred back to the United States, the labor cost and industrial chain supply costs are bound to rise significantly.
It is simply infeasible to force enterprises and jobs to return to the United States by means of a trade war. On the contrary, As American companies become more difficult to trade in the United States, they will look to more open overseas markets.
Automobiles and mobile phones are two types of consumer products. Multinational companies that produce these two kinds of goods often have different global production and sales layout principles. Automobile manufacturers generally tend to sell where they are produced, while mobile phone manufacturers tend to optimize their chain cost on the global scale and strive for the lowest price of the product. This is the natural law of the economy in the era of globalization which cannot be changed easily by any government.