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Trade Tensions Prompt Supply Chain Changes For Firms In China

Kevin Hassett

On Wednesday afternoon, Apple Inc. cut guidance sending its stock down 10 percent and the S&P 500 down 2.5 percent. CEO Tim Cook, in a letter to investors, cited trade issues, “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”

The following morning, Kevin Hassett, chairman of the U.S. Council of Economic Advisers, added to the China concerns in an interview with CNN stating, “the Chinese economy is slowing in a way that I haven’t seen in a decade.”

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Bloomberg searched through conference call transcripts, from the second half of 2018, looking for companies that mentioned they were exploring manufacturing options outside of China as a result of tariffs and the trade war:

Enphase Energy, whose solar panels were subject to tariffs, spoke of the need to move manufacturing out of China at its analyst day in August. A month later, it announced an expansion in Mexico with contract manufacturer Flex.

“We are fighting for exclusion et cetera, but our strategy is pretty simple. We recognized the need to have contract manufacturing outside China. We are already proceeding towards qualifying Mexico. I have already invested the capital for that. I’m going to have manufacturing in Mexico in six months to nine months like what I said on the earnings call and those are actually happening as we speak”

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