Cookies This website uses cookies to function optimally and to respond to the information needs of the visitors. By using our website you agree to the placing of cookies. Read more about this in our privacy and cookie statement.
Afbeelding: architecture-bicycle-buildings-zwart

Six questions about the trade war between the US and China

24 April 2019

You have probably heard of the trade war with China that was declared by President Trump in 2018. Since then, certain goods imported into the US from China have been hit with high import duties. Trump is trying to protect the American economy, yet his actions have affected many American and European companies who have outsourced their production activities to China. What is going on, exactly? What is the best thing you can do about it as a company? Our international account manager Tim Franssen has the answers.

How does the US decide what products are subject to the import duties?

“This is decided based on a product’s HS code. It mainly concerns products that the US imports on a large scale, such as food and consumer electronics. The purpose of the import duties is to make it less appealing for Americans to import products from China.”

How high are the import duties for these products?

“At the moment, 10%. The rate was supposed to be raised to 25% per 1 April 2019, but that measure has been postponed. Trump and Xi are still negotiating on the issue. It is still possible for the import duties to be raised in the future. In any case, we are keeping a close eye on the latest developments.”

Afbeelding: architecture-asia-buildings-2023149

Why can this measure have a negative impact on European and American businesses?

China’s production environment is fantastic, which is why many European and American businesses have decided to build their factories there. In these factories, production activities are conducted in accordance with European and American standards for quality, sustainability, safety, and employment conditions. However, because of the higher import duties, these businesses have to pay more taxes on their products. That means they raise their product prices and American consumers end up paying the bill.”

Can you get around the import duties, e.g. by packaging products from China in a different country and then exporting them to the US from there?

“No, it is not that easy, unfortunately. At least 60% of the cost price of a product must have a non-Chinese origin. The American government enforces that rule very strictly.”

Are there other ways to avoid the import duties?

“Yes, there are. You can have your product – or at least most of it – produced in a different country. For example, Rompa Group has a fully equipped production site in the Czech Republic and assembly facilities in Slovakia. That allows us to produce on a local-for-local basis on several continents.”

Afbeelding: 20181213_Rompa_Group_Personeel_117

Is that truly cheaper in the end?

“That depends on several factors. For products that mostly consist of electronics, China is still the best option. However, for products that contain more plastic, production in Europe is definitely a viable option. Of course, issues such as transport, investments, sales markets and delivery times also factor into the equation. At Rompa Group, we can calculate the total cost of ownership in various scenarios, based on all these aspects and the bill of materials. We strive to think along with our customers to find the best possible solution for their business.”

 

Start a conversation with Tim Franssen, our personal-care specialist, directly via mail tim.franssen@rompa.nl or call him via +31 (0) 13 – 204 09 88.

get informed about our innovative solutions