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Moving manufacturing out of China to avoid tariffs

In recent weeks, the tariff war between the US and China has significantly escalated. There is no longer a question of whether or not there will be tariffs on goods being shipped from China – they are now a reality.
Several questions may arise for companies that import goods into the U.S. from China. For example:

  • Are the tariffs going to be significant enough to justify moving away from established Chinese supply chains?
  • How long will it take to transition a supply chain from China to another country?
  • If companies choose not to move, will their competition move?
  • How much of the tariff is the U.S. consumer willing to shoulder if a company delays moving?
  • What if the company does not know where to move?

This really boils down to preparation and willingness to transition out of China. If businesses do nothing, the likely outcome from the possible 25% levies is potential economic decline in their industry.

“…The U.S. trade representative, Robert Lighthizer, said the new tariffs would apply to about $300 billion a year of imports, more than doubling the roughly $250 billion of imports that now face a 25% tariff.” - Bingyan Wan, Akane Otani. “Fresh China Tariffs Heighten Standoff.” The Wall Street Journal 14 May 2019: A8

While the full tariff List 4 has not been revealed, it would be a huge gamble to assume that the items your company is importing will not be impacted by these tariffs. With that in mind, VPI is sharing some information about overseas manufacturing options and the capabilities that we have been using over the last 12 years.

Although VPI has experience manufacturing in Taiwan, Malaysia and Thailand, as well as a few other countries, most of our experience has been with the Philippines. Our established partners in the Philippines seem to have had the best price stability. Additionally, their infrastructure and capabilities continue to mature.

VPI’s established and trusted partners all operate in economic free trade zones. Capabilities include the basics of injection molding, metal stamping, SMT/PCB Assembly, and final assembly of electronic and complex mechanical assemblies.

The large English-speaking workforce is well-educated, offers lower labor rates compared to China, and is significantly more stable. Additionally, we have implemented a high level of trust and transparency in our partnerships. We have a lot to say and show on this subject that we would be happy to share with you.

Over the last six months we have been transitioning one of our clients out of China. After our visit to the Philippines, they stated that they were hoping to find a manufacturing facility that was a “diamond in the rough” and came away realizing that they had found the “polished diamond.”

If transitioning out of China is something in which your company is interested, but you are not sure how to begin, simply entertaining the thought, or are just plain curious about this topic, please give VPI Manufacturing a call and we can support you in your investigation, thoughts, and questions.

For those companies wanting to evaluate moving production domestically, please come and tour our new 20,000 square foot domestic manufacturing and fulfillment facility in Draper, Utah where we specialize in small to medium quantity assemblies, high-end complex assemblies, and products with unique assembly and testing requirements.

For additional information and inquiries:

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