Jul 9, 2019

The U.S.-China trade war could spark an Asian labor shortage

Inside a Vietnamese factory. Photo: Getty Images

As the trade war with Beijing drags on, dozens of firms — from high-tech electronics manufacturers to apparel companies — have the same idea: relocate out of China to dodge the tariffs.

Yes, but: One seldom-discussed consequence of those moves is a potential labor shortage in places like Vietnam, Bangladesh and Cambodia, where many U.S. companies are fleeing.

What's happening: Clothing and consumer goods companies that require low-end manufacturing had already been leaving China in search of cheaper labor before the trade war. Now, tariffs and threats of intellectual property theft are pushing the higher-tech firms, like automakers and electronics manufacturers, out of the country as well.

  • U.S. apparel and footwear companies like Hanes, Levi's and Nike have steadily shifted to Vietnam and Bangladesh as the third and fourth batches of tariffs, which largely target consumer products, loom, says Mike Zuccaro, a senior analyst at Moody's.
  • HP and Dell are the latest electronics companies to go, and Amazon, Microsoft, Sony and Nintendo are looking to leave as well, reports the Nikkei Asian Review.

The impact: Together, HP and Dell make up around 40% of the laptop market, and they will move up to 30% of production elsewhere. Nikkei did not report where the firms intend to go.

The bottom line: "These countries are smaller, and the supply of land and skills and labor doesn't match that in China," says Joy Dantong Ma of the Paulson Institute. "And it's not just the labor but the roads, bridges and airports. It will take a while for the infrastructure to catch up."

Go deeper: The world can't afford a trade war

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Illustration: Aïda Amer/Axios

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Photo: Teh Eng Koon/AFP via Getty Images

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China's economic growth slumps to 27-year low amid Trump trade war

A textile factory worker in China's central Henan province. Photo: STR/AFP/Getty Images

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By the numbers: The figures released by the Chinese government show the GDP came in at 6.2% — a deceleration from the previous quarter’s 6.4% annualized rate and the weakest pace of growth since the government started releasing quarterly data in 1992, per Reuters.

Go deeperArrowJul 15, 2019