1 in 4 firms has no trade-war backup plan: Poll

Of the respondents, 48 per cent from the engineering and manufacturing industry and 40 per cent from the car mobility sector reported that they had no contingency plans at all.
Of the respondents, 48 per cent from the engineering and manufacturing industry and 40 per cent from the car mobility sector reported that they had no contingency plans at all.PHOTO: REUTERS

SHANGHAI • As the US-China trade war drags into its 16th month and continues to disrupt supply chains, over a quarter of multinational firms have not made contingency plans, according to a survey from a subsidiary of courier giant DHL.

The survey by DHL Resilience360, a supply chain risk management software platform under Deutsche Post's courier unit, included 267 anonymous responses from supply chain executives across industries including healthcare, automotive and consumer.

Over half of the respondents were from companies with annual revenue of over one billion yuan (S$194 million) and most were from the United States and European Union, the survey showed.

Of the respondents, 48 per cent from the engineering and manufacturing industry and 40 per cent from the car mobility sector reported that they had no contingency plans at all, even though both fields have been heavily targeted by both countries in the trade war.

"We're now dealing with such a new frontier that most supply chain professionals have not encountered this before and it's so new that I think a lot of people are struggling to even understand what they can do to deal with it," said Ms Shehrina Kamal, product director for risk monitoring at DHL Resilience360.

Of those that had decided against relocating or shifting production out of China, some said they were unaffected by the trade war. However, 43 per cent said long-established connections with Chinese factories and suppliers as well as cost and time were among reasons for staying put. Just 8 per cent of respondents said they expected tariffs to eventually be removed.

Of the 12 per cent of respondents that have moved manufacturing out of China, some said they faced headaches such as a lack of skilled labour, heavy port congestion and maintaining supplier quality. India and Vietnam were among the most popular alternative locations.

The US and China have imposed tariffs on billions of dollars' worth of each other's goods since July last year as trade friction between the world's two biggest economies worsened despite several rounds of negotiation. Industries hit so far include cars, retail and technology.

The disruption has led other Asian countries to compete for investment from companies moving supply chains to escape higher tariffs, with governments offering tax breaks, promising to slash red tape and sending trade missions.

 
 

Meanwhile, news website Axios reported that a trade deal between the US and China is now "stalled because of Hong Kong legislation". Citing a source close to US President Donald Trump's negotiating team, the report said the deal was stalled also because time was needed to allow Chinese President Xi Jinping's domestic politics to calm. China's Foreign Ministry said last week that legislation signed by Mr Trump last Wednesday backing protesters in Hong Kong was a serious interference in Chinese affairs.

A version of this article appeared in the print edition of The Straits Times on December 03, 2019, with the headline '1 in 4 firms has no trade-war backup plan: Poll'. Print Edition | Subscribe