For some U.S. brands seeking a location for their factories, the economic logic is once again pointing to China.
The factory is owned by a Chinese manufacturer that makes flashlights for American customers. When President Trump’s tariffs on China hit 145 percent last year, companies embarked on a panicked search for cheaper alternatives in countries like Vietnam and Thailand, including this facility.
But since then, U.S. tariffs on China have come down sharply, leaving the leaders of some of those same companies with second thoughts.
“Have we pulled back to China? Yes, we have,” said Phil Laster, the chief operations officer of Alliance Consumer Group, a Texas-based company that sells flashlights made in the Thai factory to U.S. customers. Mr. Laster had encouraged the Chinese manufacturer, Ningbo Bright Electric, to build a factory outside China to make his products, but he is hitting the brakes on the strategy now that U.S. duties on Chinese goods are more comparable to those on products from Thailand.
One of the most surprising outcomes from a whiplash year of tariffs may be that China has emerged in a position of relative strength, with significantly lower tariffs than last year. The Trump administration last week imposed a new tariff rate on Chinese exports of 12.5 percent, similar to rates for dozens of other countries, as it works to resurrect the tariffs struck down in February by the Supreme Court.
Chinese exports are still subject to other duties, including from Mr. Trump’s first term, and more tariffs could be on the way. But many industry executives and analysts speculate that the Trump administration will keep future tariffs on China relatively restrained to try to stabilize a rocky relationship.
The overall U.S. weighted tariff rate on Chinese goods is slightly above 23 percent, according to an analysis by Guojin Securities, a Chinese financial firm. And for some products, the tariff rate for China is identical to the rate on exports from Southeast Asian countries, where many companies have moved their supply chains.
This has created a conundrum for executives like Mr. Laster, who would prefer to diversify his supply chain. But making flashlights in Thailand costs as much as 15 percent more than it does in China, as a result of higher costs for materials and transport. Mr. Laster is also under pressure from Chinese competitors that are selling flashlights on Amazon for less than it costs ACG to ship its products to the United States.
“We don’t want to go back to China, but at the same time, we’ve got a business to run,” he said.
Mr. Trump has long blamed China for undercutting American competitors and has imposed punishing tariffs in an attempt to force manufacturers back to U.S. shores. In his first term, he waged a trade war on China, imposing tariffs on about two-thirds of its exports beginning in 2018. In his second term, China was his first target. He raised duties on Chinese exports to triple-digit levels, before China responded by cutting off the supply of critical minerals, forcing him to back down.
