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US companies are competing to negotiate prices from Chinese suppliers, change production and raise prices for US consumers while executives deal with 20 percent of President Donald Trump’s additional fees for Chinese goods and prepare for more.
Trump campaigns with a 60 percent promise of Chinese goods, and the White House can impose additional taxes on imports from China on April 2, when it discovers “Mutual Tariffs” in the world.
It is unclear how high tariffs can go, but American and Chinese companies are looking for work routes and rethinking their supply chains to reduce trust in China.
“Taking cost concessions from our sellers” was at the top of the list, Jeff Howie, the leading home financial officer, will be told this month.
Howie said the company would continue to relocate resources from China, having already reduced goods made by Chinese from 50 percent of inventory in 2018 to 23 percent. He said they would also expand production in the US and “were going through the rise of target prices for our customers”.
The owner of pottery drugs is one of several American retailers operating. Costco and Walmart have already demanded price reductions from suppliers, with the latter followed by Chinese authorities to explain their opinion.
Price reduction requirements, along with movements to shift production elsewhere, point out how large enterprises have built greater sustainability and flexibility in their chains after Trump’s First Trade War and Pandemia Covid-19.
US and Chinese companies said the latest tariffs had accelerated a production diversification movement that began during Trump’s first term.
“The 2017 tariff round certainly created action, and we are in a different position than we were at the time,” Richard McPhail, the leading financial officer of the home Improvement Giant Depot Home, told the Financial Times.
The Home Depot Ted Decker chief added that many of its suppliers had moved some products from China over the past seven years. About a third went to South East Asia, one-third in Mexico and one-third in the US, he said.
Elegant Home-Tech, a Chinese manufacturer sending vinyl floor to the US, including the Home Depot warehouse, began construction of a factory in Mexico in 2023 after the first period of Trump’s fees.
The $ 60 million factory will start transporting the floor to the US this summer, a manager said in the company, demanding that it is not appointed. The group hopes that it will not be caught in the fire of US trade tensions.
“Everything is uncertain,” the manager said. “This is difficult for manufacturers, importers and sellers.”
The stylish Home-Tech is in negotiations with its customers on how to share the increased load of tariffs, which now stands at 50 percent. This includes 25 percent from Trump’s first term and normal 5 percent level.
“Our profit is very small,” the manager said. “It is impossible for us to allow all tariff costs. We will surely share the costs. We think the price (inside the store) will also increase.”
Chinese pet food maker Petpal Pet Technology Nutrition told investors its factories in Vietnam and Cambodia “could now fully receive orders from American customers” and “not affected by fees”.
Similarly, the Chinese Globe Battery Manufacturer said “the Vietnam factory has essentially achieved the full coverage of exports in the United States.”
The problem for companies that shift their production elsewhere is that they are not sure who will be hit by the other tariffs. Trump has said that the only safe way to avoid tariffs is to move production to the US
“No one knows what tariffs will be put, where, when or what,” said Jay Schottenstein, chief executive of the American Eagle clothing brand. “We do not know what will be in Vietnam, we do not know China. We do not know India. We do not know Bangladesh.”
“We will not jump all over the country until we know exactly what the story is,” he told the analysts.
However, Eagle American leaders said they had spent months preparing and planning to reduce China’s resources from the current “senior teens” to “single figures” to the second half of the year.
For retailers, especially those who rely heavily on Chinese production, the effects will be more harmful.
Retail seller five below, which emanates about 60 percent of its products from China, expects a percentage point hit in its gross margin for the year, despite its best efforts to soften the impact.
Kristy Chipman, five below the chief of finance, told analysts that the group was seeking to renegotiate prices with suppliers, change production and raise several prices within stores.
“The width and size of the recently announced tariffs are important,” she said.
Additional reporting by Nian Liu and Wenjie Ding in Beijing and Thomas Hale in Shanghai
