Summary Overview: China and the United States have been in the process of a slow-motion divorce, or de-coupling, over the past several years. The upcoming US elections are likely to heighten tensions and accelerate this decoupling. The fallout from the intensifying trade war between the world’s two largest economies could be drastic and it is incumbent on all companies working with China to make preparations and diversify supply chain options.
Background: Tensions between the United States and China are nothing new, particularly around trade. This tension took on a new dimension when President Trump took office and slapped 301C tariffs on a large swath of Chinese-made goods. These tariffs hit the branded merchandise industry hard, affecting common items such as bags and paper products. China responded by devaluing their currency, causing the United States to label China a currency manipulator.
Tensions between China and the United States were not just limited to trade. Issues like the status of Taiwan, the Russian invasion of Ukraine, the treatment of ethnic minorities in China, and how best to combat climate change have further widened the gulf between the two powerful nations.
President Biden has continued many of the Trump-Era policies, and on occasion, even intensified pressure on China. Not only has he preserved President Trump’s tariffs, but he has enacted the Inflation Reduction Act and other measures seeking to bring critical technological industries out of China and into the US.
Looking Ahead: Even in a highly polarized United States, there is a bipartisan resolve to maintain a tough posture on China policy. Despite President Biden’s hardline approach to China, President Trump is looking to outflank him and paint the Republicans as the true China hawks, going as far as to float a 60% tariff on all Chinese goods. This nearly ensures that China-critical rhetoric will permeate the 2024 elections and an even more aggressive stance toward China will result from the elections, regardless of who wins.
Preparing For the Worst: While the future is unpredictable, businesses should prepare for the worst. All companies that utilize branded products and uniforms in their business should assess their supply chain and decrease dependence on China. These companies should:
● Look for options outside of China. Even if China currently provides the best short-term value from a cost or lead-time perspective, this may change should the trade war intensify. Now is the time to be proactive and solidify your supply chain options.
● Seek redundancies where possible. The changing geopolitical landscape will affect more than just the US and China – having multiple backup options will increase the likelihood that you have a stable, successful supply chain solution.
● Plan on having additional inventory on hand for the end of 2024. If geopolitical factors necessitate a supply chain pivot, you may need a buffer to tide you over until the new supply source can deliver. Drastic measures taken by the US or China will likely cause a flood of action in alternate sourcing regions, taxing factory bandwidth and logistics infrastructure. You should be transitioning your supply chain from a position of comfort, not from a position of desperation.
BAMKO’s Preparations: BAMKO’s preparations began well before 2024. In 2018, BAMKO began investing in a diversified supply chain and a less China-centric position. We pivoted out of China for several core product categories, establishing a reliable supply chain in countries like Vietnam, India, Indonesia, Bangladesh, Thailand, Colombia, Brazil, Mexico, Haiti, and others. We developed expertise in each region, understanding the comparative advantages and operational tendencies of each. Today, our reach is vast; we have relationships with factories around the world and have a network of redundant suppliers to tap into should the need arise.
In addition, BAMKO has expanded our sourcing and logistics team beyond China to ensure that we have boots on the ground in critical manufacturing regions. We have sourcing offices throughout North America, South America, Central America, and in multiple countries in Asia.
Although we expect challenges – sometimes steep – in the coming months and years, there is no company in the branded merchandise space better situated than BAMKO. With our diversified supply chain, best-in-class sourcing expertise, and global teams, we will adjust to any turbulence and continue delivering world-class sourcing, manufacturing, quality control, and logistics to our customers.
