With the deterioration of U.S.-China trade relations, small suppliers such as auto-parts manufacturers and their American customers are in trouble. Auto-parts manufacturers are already struggling to cope with the soaring costs of steel and aluminum, and now the trade war is threatening to subvert an industry that is increasingly dependent on the U.S.
The U.S.-China trade war may make September a very slow month at most of China’s auto-parts factories. In July of this year, Trump imposed tariffs on auto parts such as car gaskets and ignition wiring devices. Throughout the summer, the LED lights American buyers of an auto-parts factory in China are doing their best to urge the producers to deliver their orders in advance to avoid a new round of tariff increases.
According to the data of U.S. Commerce Department, in the first half of this year, Chinese auto-parts markers exported about $9.8 billion worth of products to the United States, an increase of nearly 13% over the same period last year.
Now, this growth is threatened. In early July of this year, U.S. Trade Representative Robert Lighthizer announced a list of upcoming tariffs, including car wipers, bumpers, mufflers and car seats. This is bad news for Chinese producers. Janny Zhou, export manager of a car engine parts manufacturer in Taizhou of Zhejiang, revealed that most of her U.S. customers usually place recurring orders every month, but in August it was unusual.
Last year, the United States imported a total of $149 billion of auto parts, of which China is the second largest supplier.
American companies such as AutoZone Inc. and Advance Auto Parts Inc. (the second-largest auto parts company in the US) need to source cheap, high-quality auto-parts. In their view, many Chinese suppliers’ products are difficult to replace. Often these U.S. buyers take years to find reliable suppliers that meet quality requirements and delivery plans.
However, there are still some U.S. buyers trying to find alternative suppliers. Hopkins Manufacturing, a Kansas-based aftermarket auto parts supplier, Brad Kraft, CEO of the company, said in August that they have been procuring parts from 45 Chinese factories, but now they are considering switching to a new supplier in Taiwan instead.
The goal of Trump’s tariff collection is to bring the relevant business back to the United States and save domestic employment opportunities. But the result will be counterproductive: it will miss out on employment opportunities, force companies to move out of the United States and hinder the development of U.S. manufacturing.