Could Consumers Force the End of Made in China?

Date: Friday, June 19, 2020
Source: Sourcing Journal

As brands and retailers around the world grapple with a sourcing relationship with China that, in some cases, has become unsustainably dependent, many are at a loss for how to untether themselves.

But according to new research, it could be the consumer who fuels an accelerated end of Made in China.

There’s an “emerging negative sentiment toward Chinese products in America,” a report by Coresight Research released Thursday found.

As many as 47.8 percent of respondents to a survey conducted early in June said they either agree or strongly agree that U.S. retailers should source fewer products from China. In light of the pandemic and the sentiments that have emerged surrounding it, 39.7 percent said they are now less willing to buy Made in China products.

“This indicates the mistrust among U.S. consumers about China-made products and quantifies U.S. backlash over China’s handling of the coronavirus,” Coresight said. “U.S. retailers may need to urgently review the extent of their reliance on China as a manufacturing hub and to evaluate whether the Made in China label is a concern for their global consumer base.”

Since COVID-19 touched down in America, President Trump has been clear that he blames China for its role in the pandemic’s domestic spread, which has only served to inflame tensions between the two nations—tensions that had already been running high amid a back-and-forth tariff war. In May, as part of a more detailed plan to reshore American manufacturing (particularly with regard to essential items like PPE and medical supplies), Trump granted new authority to United States International Development Finance Corporation to finance companies producing “vital” goods and services stateside. Lawmakers are reportedly working on programs that would incentivize U.S. companies with tax breaks and subsidies if they uproot their China-based supply chains.

China, which has consistently promised to respond in kind to any of the Trump administration’s adverse actions on trade, said in May that the U.S. should cease its ongoing efforts to keep China from modernization, lest it risk pushing the two countries “to the brink of a new Cold War.”

Needless to say, a shift in consumer sentiment that aligns with Trump’s feelings on making in China could prompt brands and retailers to hasten their scale back on sourcing there.

Already, according to Kearney’s most recent U.S. Reshoring Index, manufacturing imports from China have registered a “particularly sharp decline.” Between 2018 and 2019, U.S. imports from China dropped 17 percent, and the shift has only accelerated as the trade war rages on. For textiles and apparel specifically, according to data from the Office of Textiles and Apparel (OTEXA), U.S. imports of textiles and apparel from China in the year to April, dropped more than 41 percent, leaving China with a 30.53 percent share of a market it had long had a much more outsize hold on. Of the $31 billion in U.S. imports that shifted from China to other Asian low-cost countries in the 2018-2019 period, Kearney said 46 percent of it went to Vietnam.

“It appears that a new Asian trade balance is taking hold, and may not be reversed even if the U.S. and China eventually resolve their significant trade disputes,” Kearney said. “More fundamentally, we anticipate that the threat of future crises will compel companies to restructure their global supply chains with an eye toward increased resilience, as well as lower risks and costs, as resilience is the key to operating profitably in the face of ongoing disruptions.”

And that restructuring for greater resilience has already prompted companies to ramp up their supply chain remapping efforts.

According to Coresight’s report, German footwear brand Von Wellx announced in May that it would move all of its production from China to India. Apple has also reportedly been in talks to move 20 percent of its production from China to India. Japanese consumer goods company Iris Ohyama received a government subsidy to move its manufacturing out of China and into Japan.

“Should political rhetoric continue to ramp up and Western consumers retain or even increase negative sentiment, we could see many more companies follow suit in moving some or all of their production out of China,” Coresight said. “Retailers and brands must not only pay attention to politics and ease of trade on the supply side; they must consider the demand side—what their customers are thinking and whether they are paying more attention to the subject of sourcing.”

 

Read from the original source.

 

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