How the US-China Trade War Impacts the Channel

us china trade war

The escalating trade tensions between the United States and China has left global businesses in a tenuous situation. New tariffs on finished goods and raw materials are steadily increasing supply chain costs and leading to delays in customs clearance. Many businesses are now reconsidering long established supply chains and logistical partnerships. If you’re planning to do business with or export to China, it’s important to understand the chain of events that led to this situation.

How did the trade war escalate?

  • USA – April 2018
  • In response to China’s alleged trading practices, ie. the forced technology transfer policy, the Trump Administration announced that it will impose a 25% tariff on $50 billion worth of high-tech industrial imports from China.

  • China – April 2018
  • In retaliation, China announces its own 25% tariff on $50 billion worth US goods.

  • USA – April 2018
  • The Chinese company ZTE was penalized for doing business with Iran and North Korea. US bans ZTE from purchasing from US suppliers for seven years.

  • China & USA – June 2018
  • China agrees to lift tariffs on some agricultural products in exchange for lifting the US supplier ban on ZTE.

  • USA – June 2018
  • The Trump Administration announces plans to enforce the 25% tariffs on $50 billion of Chinese imports.

  • USA – June 2018
  • The Trump Administration announces plans to impose a 10% tariff on $200 billion worth of Chinese imports.

  • USA & China – July 2018
  • Both sides officially implement tariffs on $34 billion worth of each other’s imports. An additional $16 billion is expected to go into effect soon.

  • USA – July 2018
  • President Trump said in an interview that he was willing to impose a tariff on all $505 billion of Chinese imports.

In this bout, we have seen two global powers trade punches back and forth. Unfortunately it’s becoming clear that American firms doing business in China are caught in the middle.

Why did the trade war start?

When discussing this trade dispute, it is important to note the trade imbalance that exists between the two countries.
2017 Import Numbers (via US Census Bureau)

  • United States imported around $505 billion of goods from China
  • China imported around $130 billion of goods from the United States.
  • US has a $375 billion trade deficit with China.

us china trade imbalance

What is the impact of the trade war on IT hardware imports?

Even if China put tariffs on every United States import, it is nowhere close to covering the potential tariffs the US can enforce. The Trump Administration has already imposed tariffs on $34 billion worth of goods, with plans for $216 billion more. President Trump has even come out and said he is prepared to impose tariffs on all $505 billion of Chinese imports.

China will have to think of alternative measures to respond to escalations by the United States. Many believe China’s response will come in the form of holding shipments at port, stringent licenses controls, surprise compliance inspections, or fines for multinationals without the proper legal documents covering their imports. This added pressure on supply chains, especially around customs compliance and processes, will become costly for businesses when the necessary safeguards are not put in place. China has a notoriously rigid import process that has the potential to become even more strict.

How to continue importing to China:

To ensure that deploying IT gear into China is still a viable option in the future, it is critical to partner with an IT shipping specialist with vast experience and a strong local presence in China. Whether you’re planning to support your offices in Shanghai, Beijing, or elsewhere in mainland China, working with an Importer of Record will be critical to stress-free and successful deployments.

FGX’s importer of record service in China provides the local expertise needed to properly import IT equipment; we handle all the paperwork, hold the necessary licenses/authorizations, and manage the customs clearance process on your behalf.

By working with FGX, your data center rollouts, office infrastructure upgrades, or end-user technology deployments will stay on schedule. We will also monitor this trade dispute closely through our partners in China for our clients. This will allow your business to continue to react quickly despite the changing political climate.

FGX – First Global Xpress provides door-to-door IT deployments solutions into Beijing, Shanghai and great Mainland China. Our global team works on your behalf to ensure the timely delivery of your IT hardware to your local offices and data centers in China. Contact us for more information at hello@fgx.com or call: (212)-352-9390.