Worried about the effects of this America and China political and business trade war and how it will effect your import, Amazon FBA, and B2B trading business?
You’re not alone!
We have been overloaded with questions and are organizing a survey to provide the community.
Read on for more – or take the survey here.
For the month of May here in the year 2019, the cross-border trade industry is up in arms about the pending changes in the US/China trade relations. This uncertainty has created a huge surge in questions from readers and Cross Border Association members over the future of their businesses.
Discussing with journalists and other media companies here at Global From Asia we felt it is time someone put a poll out to the public to see exactly what you are thinking is happening with this whole trade war debacle.
Take a Quick Poll On The Trade War Challenges
Before we dive in too deep, if you can take a quick poll below to see how the USA and China trade war of 2019 has been changing the way you do, and plan, your trading business:
Don’t forget you can also click on the “show results” to see how others are already responding to this.
Watch Our Video Launch of the Trade War Survey
We created this simple video to share briefly our thoughts on the trade war and why we are launching this survey so we can get your thoughts too. Check this out:
Our Feedback So Far From The Community
Reading into this – as well as being in the e-commerce game ourselves (through our strategic investment in Amazon FBA companies through the E-commerce Gladiator exercise – here are some major points:
Many Sellers Thought This Trade War Debate Finished Late 2018/Early 2019
There was a big discussion about the increased tariffs in late 2018, and many weren’t sure what to expect. It was a lot of fear and uncertainty about how much their products would cost, landed to USA warehouse / FBA fulfillment centers.
But then it seems in January things were sorted out and we all went back to business as normal.
In mid-May 2019 Donald Trump tweeted something that stirred all this trade war discussion up again:
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
9:08 AM – 5 May 2019
Donald J. Trump
And since then the industry is in an uproar.
Many Are Not Even Sure How To Calculate Their Increased Tax Estimates
The biggest fear is not in the higher tariffs, but in the unknown of knowing how much an FBA seller, or any importer for that matter, will need to pay upon receiving the goods to US customs.
The logistics company you work with should be able to help you out. But it is also a good exercise to know how to look it up yourself. This would be first done by knowing how your product is classified (HTS code- Harmonized Tariff Schedule code). We should make a dedicated blog post just on that process. But head on over to the US customs or the US International Trade Commission site here and get your HTS code. If you don’t know how to get your code, check your previous invoices and import forms from previous shipments.
Related post: Check out our podcast with Kornilia from Forest Shipping here.
But really – this is the number one concern for importers, they have no idea how much their US customs tax bill will even be in the coming months.
Some Are Asking Factories To Share in the Tax Increase
A few we have talked to are in discussions with the actual factory. They said it should also be absorbed a bit by the factory’s profit margins – as this is an unexpected situation and should be shared by both parties.
I haven’t heard of it working yet, but the factories say they need to determine how much margin they even make and if it is at all possible.
Yes – Many Are Looking For Factories Outside of China (Vietnam, Thailand, Malaysia, etc)
Of course a lot of this is moving into Southeast Asia. We have talked to our friends at China Importal and they say while it is nice to think a buyer can simply re-source their goods in Southeast Asia, the reality is, it isn’t that easy.
Buying from China, especially if you have your own private mould and manufacturing process, will be extremely hard to move.
On top of that, the infrastructure and the sheer volume of logistics transactions in China makes buying there so much easier and faster. This is still in early stages in most of Southeast Asia and will take quite a bit of time and investment to come anywhere near where China’s manufacturing muscle is at.
That means in the short term – importers and FBA sellers will simply have to eat the increased costs.
Christmas Gifts in USA Will Be a Bit More Expensive This Year
From our discussion with leaders in the industry, we feel the increased costs will simply have to pass on to the end consumer. At least for the short term, we can’t see manufacturing start to pop up with all the moulds and infrastructure right away. And that means those higher fees importers pay will have to be added to the final price to the customer.
So Christmas 2019, we expect prices to be higher.
That doesn’t mean it will be like that forever. New sellers, or importers who are nimble and creative, will re-build their supply chain in other countries and then “knock out” those sellers who do not adapt to the changing times.
How long that will take, and will it even happen, that is the big question?
The Reality – China Has Been Getting Expensive For Manufacturing Already
This trade war is not pretty, and so many importers and sellers are really losing sleep on it. But it has simply accelerated the fact that China is not a cheap place to make your products. Costs have been steadily increasing over the years from labor to resources.
But all these headlines about the trade war and the increased taxes simply accelerates an importers need to have a “plan b”.
In our opinion, no matter what happens with the US / China trade war discussions the “damage is done”. What we mean is that people do not “trust” the tariff problem will go away, and even if a deal is made and taxes are dropped or remain the same, buyers will want to have some exposure of factories and suppliers in other parts of Asia and the world.
Take Our Complete Survey & Get Involved With the Cross Border Association
We would love to hear your detailed input on how you and those in your network are dealing with the trade war.
The team at Cross Border Association has put together a complete survey and here at Global From Asia we are powering the web survey part. Click the button below and tell us a bit about you and your business (for the survey data) and then fill out the data.
By providing your email, we will send you our findings in this report and keep you updated on future developments.
We wish all of the other business owners in the community the best of luck in adapting to these changing times.
What Some Respondents Have Been Saying
The responses we are getting are overwhelming. Here are some that we believe are worth sharing:
“This is a political game beyond our control, as a small business, what we can do is keep offering best product and service to end-customers, even though having to increase prices.”
“Consider manufacturing all or part of your product in the Philippines.”
“Prices will go up, economy will slow down.
It’s perfectly timed to make sure the upcoming recession hits when planned, not at random.”
“Always thought a China-only sourcing policy meant too much geo-political risk, but did nothing about it?
Well, you were right! – and this is the kick up the butt you needed.”
“The Chinese news outlets (i.e. the Chinese government) are warning Chinese students not to go to the US to study. this means that any city in the US that has a university will be effected by this nonsensical trade war. From the universities and colleges, to the real estate, shops, restaurants, and entire economy where Chinese students and people study and visit, the entire US will be and has already been effected. Language schools have been shut down, teachers let go, and the field of international education decimated. Most universities get their most funding not from the US government, but from tuition. And international students bring in a higher out of state/international tuition rate. They keep the universities afloat. It is dark days in international education!”
“Inflation that is going to occur over the next 12 months due to the lag increase of products. Look for a recession in around 12 months as interest rates crawl up, prices crawl up, consumer confidence falls down. Trump is trying to fill the government coffers with tariff money for the shortfall he has from the C corp tax breaks.”
“I understand that certain Chinese factories are heavily subsidized making it impossible for other countries’ factories to compete.
I’m seeing this on one particular component.
“Your last question – actually both Chinese factories and consumers and US consumers AND businesses….eg: if the economy in the USA reduces and people stop buying TV’s (as an example) because they can’t pay the increase and/or they are worrying about money going forward, everyone will be affected – Chinese factories and multiplier effects and US importers, transport companies, warehouse companies, retailers and the multiplier effects.”
Have your own thoughts about the trade war too? Do share them for we would love to know and learn.