Chinese factories are normally at their busiest during the third quarter, cranking out production of everything from Barbie dolls to miniature trucks in time to ship them over the ocean to the US ahead of the all-important holiday shopping season. This year is different.
Even with US President Donald Trump delaying tariffs on US$160 billion of toys to smartphones to spare the Christmas boom for US retailers, the damage has already been done.
That is because big toy purveyors like Walmart Inc have already piled up inventory given the uncertainty over how the trade row will pan out, according to industry officials.
“We will be among those bearing the brunt,” said Justin Yu, a foreign trade manager at Pinghu Mijia Child Product Co (平湖米家兒童用品), a maker of toy cars and kids’ scooters in Zhejiang, China. “The influence is definitively huge.”
Yu plans to find new customers in Europe, Middle East and Africa to make up for the US shortfall. The company is considering reducing North America’s significance to its revenue to avoid future tariff hits.
Yu said he sends US$25 million of goods a year to US retailers, including Target Corp and Walmart.
Retailers started a buying frenzy a year ago as trade tensions began to heat up — shipping cargo volume to North America from Asia rose 7.9 percent in the second half of last year, according to data compiled by Bloomberg.
That growth has slowed significantly this year — to just 0.2 percent in the first half — as US warehouses filled up.
Pointing to a continued slowdown in goods volume, China’s exports to the US last month dropped 6.5 percent from a year earlier in US dollar terms.
That means US shoppers are likely to see fewer new items in stores during the holiday season as retailers limit purchasing to reduce stock toward normal levels, said Rahul Kapoor, head of research and analytics at IHS Maritime & Trade in Singapore.
“There won’t be any empty shelves,” Kapoor said. “Inventory level is very high.”
Another industry getting hit, shipping, is cutting capacity as volumes shrink.
CMA CGM SA, the world’s third-biggest container-shipping company, would pull out two vessels of its Asia-Europe services as early as this month.
Orient Overseas Container Line Co (東方海外貨櫃航運), owned by China’s biggest shipping company, also halted some services to the US and Europe from last month.
Adding to their woes, the slowing volume has pushed shipping fees down at a hefty pace.
Rates to move cargo on major trade lanes have fallen 7.4 percent this year, with those for the US slumping 26 percent, according to Drewry World Container Index.
“This peak season is going to be challenging,” said Um Kyung-a, a shipping-industry analyst at Shinyoung Securities Co in Seoul. “Some shipping companies probably are not able to cover their costs.”
A further concern is that the trade row will spill over to next year, hurting consumers’ eagerness to go shopping.
The IMF last month cited trade tensions as one of the biggest risks to the global economy as it downgraded its growth forecast for this year and next, while Goldman Sachs Group Inc has said there is growing concerns that the trade dispute will trigger a US recession.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
RSS