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DTI receiving inquiries from manufacturers seeking to leave China

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REUTERS

THE Department of Trade and Industry (DTI) said it has received inquiries from some foreign firms seeking to relocate manufacturing operations to the Philippines amid tensions between US and China.

“That’s what we have observed, interest in relocating in the Philippines,” Trade Secretary Ramon M. Lopez said in a mobile message, adding that he will soon be consolidating the inquiries.

He was responding to BusinessWorld’s request for comment on the recently-released report by the American Chamber of Commerce in the People’s Republic of China (AmCham China), which measured the impact of tariffs imposed by both the US and Chinese governments.

One of the key findings of the study noted that Southeast Asia is the top destination for US companies considering to relocate manufacturing facilities out of the mainland amid escalating bilateral trade tensions.

Nearly two-thirds or 64.6% of respondents said they have not yet relocated manufacturing facilities out of China and are not considering the move.

Meanwhile 18.5% of those who have plans to do so have picked Southeast Asia as their top destination.




Some 6% said they are considering relocating back to the US Other destinations being studied are the Indian subcontinent (6.3%), East Asia (4.2%), Europe (4.2%), and Latin America (3.9%).

Some 33.5% of respondents producing consumer goods are considering relocating their China-based manufacturing to Southeast Asia.

In the technology and telecom hardware industry, 26.7% are considering the region; for the automotive sector the share is 25%; and in the chemicals sector, 23.1%.

The study shows that 60% of respondents have found that the initial round of tariffs affecting a combined $50 billion worth of trade between both the US and China have negatively affected their companies.

In addition, the percentage of companies anticipating a negative impact from the second round of tariffs was 74.3% for the US tariffs covering $200 billion worth of goods, and 67.6% for Chinese tariffs affecting $60 billion.

“Adjusting supply chains is a common response to the tariffs, with many companies seeking to source components and/or assembly outside of either the US (30.9%) or China (30.2%),” according to the AmCham report, which covered more than 430 companies contacted between Aug. 29 and Sept. 5.

The DTI had said the Philippines can benefit from the spillover effects of the US and China trade tensions in the short term.

However, DTI’s Mr. Lopez has also warned that continued retaliatory tariff hikes would also have a negative effect in the long-term. — Janina C. Lim