The TN-China Network (TNCN), Chattanooga Area Chamber International Business Council (IBC), and the Chattanooga Regional Manufacturers Association (CRMA) teamed up on September 27 to host a dynamic and informative discussion on how to navigate the changing US-China trade environment.
A mixed-sector panel of experts with experience on both sides of the Pacific provided timely insight to mitigating the negative effects the current trade war has had on manufacturing, logistics, and currency.
Panelist Rick Walker, Vice President of logistics company V. Alexander, began the conversation with a visually simple chart on China Tariff Timelines. The chart showed a breakdown of tariff lists, times, products affected, and exclusion deadlines. Rick pointed out that as of now, almost everything made in China is subject to the tariffs, and it may be that Tennessee companies should seek relief by proposing their Chinese manufacturers help absorb some of the additional duties. He encouraged businesses to look closely at the product classifications and apply for exclusions wherever possible. In some cases, diversifying manufacturer location–changing the source country–may also be necessary in order to maintain profitability.
Panelist and Vice President of Global Trade Finance Group at Regions Bank, Thomas Matthias commented that moving your source company could be very risky considering China’s comparative maturity in manufacturing, operations systems, and overall quality. He suggested that making exclusion requests and working with banks to consider letters of credit (LOCs), risk mitigation, insured accounts receivable (ARs), and other trade programs may be the best course of action for Tennessee importers and exporters to ride out their difficulties.
While many US companies are pulling away from China, panelists David Anderson Jr., Vice President of Sales & Marketing and Dr. Andy Sun, China Managing Director at Colonial Chemical expressed their excitement about opening their first China office in Shanghai. American cosmetic products have been steadily embraced even with the recent “patriotic” (don’t buy American) feeling surrounding other consumer goods in the China market. Dr. Sun emphasized the importance of cultural adaptation. This encouraged event attendee Kenny Hammontree, Brand Manager at McKee Foods, who just launched a snack product specially designed for the China market and is eager to see it rise above any anti-American market stigma.
Panelist Jeremy Goldkorn, Editor-in-Chief of SupChina.com, advised the audience to get used to the “new normal” that is current US-China business relations. The wave of optimistic and easy business has passed, he commented, and we have entered a new stage where we’ll need to think differently. When asked from the floor by Eric Kruger, Professor of Economics at University of Tennessee at Chattanooga (UTC), what Jeremy’s negotiation might sound like if he were president, he replied, “We need policies of reciprocity, not tariffs. If we cannot invest there in an industry or sector, they should not be allowed to invest here in an industry or sector.”
Several professionals in attendance represented a variety of consulting companies assisting Chinese companies doing just that–piloting greenfield investment in Tennessee. “If it’s too hard to export, they’ll move here,” Sophia Qi of Elliot Davis commented. Thomas Matthias affirmed the large influx of Chinese investment, and said that companies are seeking to be closer to their customers. “With rising costs of land, utilities, wages, and transportation in China, the tariffs [as a strong reason to come to the US] are the icing on the cake,” he said.
With trade (exports plus imports) between Tennessee and China hitting $29 billion in 2018 and cumulative Chinese investment into Tennessee reaching $1.36 billion in Q2 2019, Tennessee businesses are integrated with China’s economy now more than ever. As the US and China navigate evolving bilateral relations, the nearly 50 Tennessee companies, organizations, and individuals represented at this roundtable event had a unique opportunity to hear from experts, and to network and engage in conversations relevant to “on-the-ground” business solutions.
Thanks again to event organizers TNCN, Chattanooga Area Chamber IBC, and the CRMA, and to event sponsors UTC Gary W. Collins College of Business, Regions Bank, and V. Alexander.
Thank you to Derek Daniel of Elliott Davis for taking photos at the Roundtable and to Noah Kreig for writing this event summary. For more photos from this event, visit the TNCN Facebook page.