The United States currently imposes a 25% tariff on approximately $250 billion of imports from China and a 7.5% tariff on approximately $112 billion worth of imports from China, according to the Tax Foundation. Chinese tariffs on American products are about 20%. Before the U.S.-China trade war, U.S. tariffs on Chinese goods were on average 3.1%, while China’s tariffs on American goods were about 8%. While meant to punish China for its unfair economic policies, the tariffs that were started by the Trump Administration ended up harming the U.S. Multiple studies have shown that U.S. importers and consumers have primarily paid for the tariffs. Ben Zhang, president and CEO of Greater Pacific, says his company builds the tariff into the prices he charges distributors. His distributor clients then do the same with their end-buyer clients. “Who eventually pays the price? Not China factories—American businesses,” Zhang says. “We’re paying the bill, and it’s hurting our earnings. We’re suffering.” After the tariffs came COVID-19, causing economies to grind to a halt. Since the beginning of the pandemic in 2020, China has instituted a strict zero-Covid policy to crush outbreaks and chains of transmission. The central government enforces large-scale lockdowns, mass testing and international travel bans as part of its zero-Covid strategy. China’s strict approach over the past two years has created numerous bottlenecks in the global supply chain, with factory shutdowns and logistics closures. However, experts doubt the country will change its strategy. In March, China locked down tens of millions of people as it experienced its largest Covid outbreak in two years. With the world seemingly turning a corner on the pandemic following the Omicron variant’s global spike this winter, China’s shutdown affected 19 provinces, including Shenzhen, which is key to supply chains because of its ports. In the wake of the debilitating trade war and pandemic came supply chain snarls that entangled the world. Every aspect of the global supply chain was upended, from the factories manufacturing items to the cargo ships to transport the goods to backlogs at ports to unload the shipments. Zhang says that while it used to take about a week to get freight once it arrives in the port, it may now take months. And once a shipment clears customs, there may not be a truck driver to transport the goods. This leads to a domino effect. Suppliers like Greater Pacific can’t bill distributors for undelivered freight. Distributors can’t bill their clients. And end buyers purchasing promotional products must wait several months—time they often don’t have—to get their goods in hand. Companies shipping products from China are shelling out substantially more than they did pre-pandemic. Zhang says that a typical 40-foot container from China used to cost $3,000-$4,000 but now costs anywhere from $18,000-$25,000. “It’s unbelievable, but we have to pay it. We have no choice,” he says. Brennan Mulligan, founder and CEO of California-based Skyou, has never seen anything like it. “Everybody says it’s unprecedented, but it applies in this case,” he says. “Everyone was blindsided.” Pivoting To Closer Shores Rather than waiting for the supply chain to iron itself out, some suppliers, includingMulligan, are nearshoring some or all of their products. This tactic lets companies bring their manufacturing operations closer to the U.S. Nearshoring allows for quicker Ethical Concerns In China It’s hard to call something “good business” if people are negatively affected by it through no fault of their own. China’s ethical conflicts are not getting easier to parse, and you should know what the top concerns are before deciding if and how you will source materials from there. Crimes Against Humanity: Since 2016, the Chinese government has reportedly detained 1.5 million Uyghur Muslims in prison camps. The Uyghur Forced Labor Prevention Act of December 2021 is meant to prevent American companies from funding forced labor. Ties to Russia: As of the publishing of this issue, China had yet to join the United States and much of the world in condemning Russia’s invasion of Ukraine. China’s relationship with Russia is of concern during these tumultuous times. A More Repressive Regime: The regime of China’s President Xi Jinping has rolled out policies that resulted in more religious persecution, less freedoms in Hong Kong, and a greater surveillance state. Meth Mehr / Aayam 4D / Shutterstock.com FEATURE | China 62 | MAY 2022 |
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