U.S. tariffs are impacting manufacturing, leading to cost pressures for companies.

The Haihui International 6-month withdrawalrecent "reciprocal tariffs" policy implemented by the United States towards China has triggered a widespread reaction in financial markets, particularly in the bond market, and has had potentially profound effects on U.S. manufacturing. Despite adjustments by the U.S. government to these measures, changes in trade policy could still significantly impact manufacturing. In imposing tariffs, the United States overlooked China's critical role as a key node in the global supply chain, especially in the supply of intermediate goods.

The U.S. government previously believed that retaliatory tariffs on trade surplus countries would inflict greater damage on these nations, but there may be flaws in this logic. In reality, many goods exported from China to the United States, particularly electronic components, chemical raw materials, and metal processing products, are essential intermediate goods for U.S. manufacturing. Short-term alternatives for these intermediate goods are hard to find, leading to a substantial increase in production costs for U.S. manufacturing, a loss not reflected in trade figures.

China's pivotal role in the global intermediate product supply chain makes it exceedingly difficult for the U.S. to "de-couple" from China. While American companies are seeking alternative production bases in other countries, they cannot avoid an "indirect reliance" on Chinese intermediate goods, given China's unique advantages in production scale, cost control, innovation, and industrial chain integration. This dependency means U.S. manufacturers face challenges such as high costs, low efficiency, and unstable quality control when seeking alternatives.

While the U.S. faces tariff pressures, other countries worldwide are also unlikely to fully establish alternative supply chains for Chinese intermediate products in the short term. Particularly for electronic products and other high-tech goods, extensive reliance on Chinese products is often necessary. As tariffs drive up production costs, U.S. manufacturers may find their products at a price disadvantage in the global market. Some multinational companies may opt to reduce profits or raise prices to absorb costs, further weakening the global competitiveness of U.S. companies.

U.S. small and medium-sized enterprises (SMEs) are in an even more challenging situation. Many SMEs rely on China's low-cost manufacturing capabilities and robust logistics systems. Now, with a sharp rise in contract manufacturing costs and customs inspection uncertainties, the production cycles and cost pressures for these businesses will significantly increase. Facing supply chain uncertainties, U.S. SMEs may have to adjust prices or even scale back operations, causing further fluctuations in both retail and job markets.

This scenario might offer Chinese companies opportunities to expand in the global market. As American firms grapple with supply chain restructuring uncertainties and cost pressures, some U.S. brands may experience declines in quality and brand image. This presents an opportunity for Chinese companies to launch their own brands internationally. Moreover, Chinese manufacturing can leverage its innovative production advantages to accelerate its global market strategy, further solidifying China's central position in the global supply chain.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.