Fleeing from China means raising prices

The United States has granted a small truce to the incessant tariff war temporarily paralyzing the levies for electronic devices. Scarce hours after communicating that The global tariff would be set at 10%completely putting the focus on 125% imposed on China, Trump throws an oxygen ball for large technological ones.

Whatever happens with tariffs, there is an inevitable consequence: the global supply chain has been broken as we know it, and companies must start moving quickly with the consequences that this entails.

Apple as best example. Among all the technology is one that stands out as the greatest beneficiary and, at the same time, such as the one that has to lose the most if it does not act agility. Apple depends deeply on its supply chain in China. The Asian country assembles almost all of its products, a situation that will criticize the entry into force of A 125% tariff to China.

In the last five years, Apple has tried diversify its production chain With factories in countries like India or Vietnambut the bulk of its production, accumulated knowledge and economies of scale are still anchored in China.

Getting out of China is not so easy. Apple is not the only giant that manufactures in China. Samsung continues to manufacture there, although to a very small extent and focused on smaller devices and components. Giants such as Microsoft, HP or Dell (USA), which have been moving production to Mexico and Thailand for years, have Much of the production chain In China.

Its hyperspecialized industrial infrastructure, perfected for more than four decades hand in hand with large technological ones, is impossible to replicate in the short term. Big Tech have been externalizing their own talent for years: they have invested millions in installing equipment, training engineers and moving their knowledge to the Asian country.

Vietnam, India, Thailand. Manufacturers need two pillars to cement their production chain: economic labor and specialized labor. Countries like Vietnam, thanks in great part to collaboration with giants such as Samsung, have been offering an alternative to Chinese manufacturing for more than two decades.

Manufacturers like Samsung They have been moving much of their production to Vietnam for years to reduce their dependence on China. Except for Apple, which is still behind in this great escape, most of the sector has followed that path. But not even that diversification guarantees total immunity: the threat of new tariffs, such as those of 46% that Trump has already imposed just a week ago to Vietnamese products, could return the commercial tension to the foreground.

An inevitable turn. There is no possible scenario that prevents deep changes in the global supply chain. Manufacturers have been avoiding production on local soil for the very high costs that this would entail, and betting on hyperspecialized countries in which they have invested millions, talent, and i+d.

The tariff threat will change the turns, whatever happens. The 90 -day extension in the exemptions will allow to avoid a sudden rise in prices, but will not prevent large manufacturers from beginning to rethink deep changes in their manufacturing strategy.

Move file and move it fast. The inevitable consequence is diversification, one that has been making progressively and slowly and must accelerate if companies want to continue respecting their profit margins.

This diversification will go hand in hand, practically inevitably, of price increases. Fleeing China completely has a cost, and thinking that manufacturers will assume the impact without moving it to final consumers is little more than utopian.

Image | ASML

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