Manufacturing is a key part of many national economies. However, certain nations, such as China, are known for having significantly stronger manufacturing sectors than most countries. In recent years, however, China’s manufacturing sector has been declining due to rising labor costs, the ongoing trade war with America, and a trend towards high-tech manufacturing jobs. This means that many companies are searching for new countries to which they can move their low-skill and low-cost manufacturing.

Here is a list of the top four countries that are picking up China’s manufacturing slack and will be major manufacturing hubs in the near future.

1. India

India is a country that is largely known for its software creation and its call centers. However, manufacturing has been steadily increasing there recently, largely due to Prime Minister Narendra Modi’s recently launched “Make in India” program that is helping to attract a large amount of foreign interest. The goals of this program are to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build best-in-class manufacturing infrastructure.

This program is part of a larger strategy to make it easy to do business in the country. This strategy has advanced manufacturing so much in India that the country is projected to by one of the top five manufacturing hubs for the world by the end of 2020. India’s manufacturing sector is currently growing by about 8% per year. It is attracting luxury brands, smartphone makers, automobile companies, and many more to conduct manufacturing in the nation. India could very well be the next China.

2. Vietnam

Vietnam has one of the fastest merchandise exports growth rates of any Asian country. In fact, between 2005 and 2013, merchandise exports increased by 20%. Considering that many companies that once used China for manufacturing are seeking out cheaper and more reliable alternatives in Asia, Vietnam could benefit substantially.

Vietnam is close to China and also borders the South China Sea, which connects to the Pacific Ocean. This means that shipping from Vietnamese countries is extremely feasible. This is desirable for companies that want to manufacture products in Vietnam and then have the products shipped to places like the United States and Canada.

In addition to its good location, Vietnam’s government has also been working hard to make business conditions favorable in the nation. It has been doing this by providing universal healthcare and job skills training, improving education, and developing infrastructure. Vietnam also has a stable political climate, which is favorable for business. All of these factors mean that there is a very good chance that more and more companies will outsource manufacturing to Vietnamese companies in the coming years.

3. Indonesia

Indonesia’s manufacturing has been growing by five percent for the last few years. Manufacturing now makes up about 25 percent of the country’s GDP. Additionally, Indonesia’s population has been growing steadily in recent years as well. The country now has about 240 million people.

Indonesia currently has some major infrastructure issues and needs to its power stations and grid, water sanitation systems, roads, seaports, airports, and urban transportation. This is especially true now that Indonesia is seeing larger percentages of its citizens migrating to urban areas.

The government has started to invest hundreds of billions of dollars into infrastructure development. So, this is encouraging. But there is a lot of room for improvement. However, if Indonesia can fix its infrastructure issues, then even more companies could outsource manufacturing to this nation. The low cost of labor, proximity to the Pacific Ocean, and relatively stable political climate are all very attractive to companies who need manufacturing. All of these things mean that Indonesia could soon become another Asian powerhouse of manufacturing.

Competition with India and Vietnam will be strong, so the country has its work cut out for it. But considering vast quantities of companies, including Apple, Nintendo, and HP, are all looking to move at least part of their manufacturing out of China, Indonesia could be one of the key beneficiaries of this mass exodus. The protracted U.S./China trade war, tariffs, and China’s rising labor costs are forcing companies to seek manufacturing outside of China. Indonesia could be where many companies including large tech companies end up setting up new manufacturing operations.

4. Singapore

Despite the fact that Singapore is a small nation and is only about 31 miles wide at its widest point, the nation has a strong manufacturing sector that has continued to grow in recent years. In fact, during 2018, Singapore’s manufacturing sector grew by roughly ten percent. Manufacturing is Singapore’s fastest-growing business sector.

The product categories that are leading the manufacturing charge in Singapore are electronics, biomedical, and transport engineering. Other key reasons why Singapore’s manufacturing sector is increasing include the fact that the country has excellent infrastructure and is very stable politically. These factors help to make businesses feel comfortable launching manufacturing operations in the nation. The political stability of Singapore gives the country an advantage over places like Thailand, which is experiencing major political uncertainty at the moment.

Singapore is yet another Asian nation that could benefit from the decline of China’s manufacturing dominance. Singapore is somewhat limited by its size. However, many companies will most likely seek to conduct manufacturing in Singapore because of all the advantages it provides.

The manufacturing map will continue to change rapidly in the coming years

After decades of consistent growth and a meteoric rise to become the world’s biggest manufacturing powerhouse, China is starting to face a lot of difficulties in its manufacturing sector. Companies are fleeing the nation rapidly and are quickly seeking low-cost alternatives. India, Vietnam, Indonesia, and Singapore will all likely benefit tremendously from this situation and see continued manufacturing growth as a result.

However, as these nations see their manufacturing increase, they will most likely have to deal with many of the issues that China is facing right now, such as rampant pollution, increasing salaries, and potentially even protracted trade wars with the United States. China is going to be forced to adapt to the fact that it is becoming an increasingly unpopular place to manufacture goods. Meanwhile, India, Indonesia, Vietnam, and Singapore can all enjoy the fruits of their hard work and watch foreign investment continue and their manufacturing sectors to increase year after year as long as this trend continues.

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Despite the fact that international trade is more streamlined and interconnected than ever before, there are still a number of issues prevalent in the industry right now. These issues are creating problems and making things more difficult for supply chains around the world to function at optimal levels. Here is a look at three of the most important issues that are affecting global trade right now.

1. Rising tariffs

As the world’s largest economy, the United States has a lot of economic power and influence. However, under President Trump, the United States has decided to engage in a series of trade wars, using tariffs as its main weapon. Throughout his campaign, Donald Trump repeatedly stated that he believed that the United States was suffering from a series of bad trade deals and currency manipulation tactics from nations such as China.

Once he got into office, President Trump started imposing several different tariffs on imported goods. He justified them as an attempt to make trade conditions more favorable for the United States.  In the past two years, Trump has put 10-25 % tariffs on hundreds of billions of dollars’ worth of Chinese goods. These goods include solar panels, steel, aluminum, and many others.

In response to these tariffs, China has also put tariffs on hundreds of billions of dollars’ worth of American imports. Currently, the United States has more tariffs on Chinese goods than China has on U.S. goods. However, this tit-for-tat trade war seems to have no end in sight. Now China has put a ban on buying U.S. agricultural products and has also devalued its currency as a further attempt to win the trade war with the United States.

This protracted trade war is disrupting the free flow of trade between the world’s two largest economies. This trade war and its consequences will be felt around the world for some time to come. The levels of trade that exist between the two nations will impact many other countries.

2. Intellectual property theft and counterfeiting

This issue also is primarily between China and the United States. President Trump has accused the Chinese of participating in rampant intellectual property theft via cyberattacks and forced technology transfers. Many different parties have accused the Chinese of counterfeiting numerous brands and products.

The continuous theft of intellectual property by Chinese companies is a very serious issue. Even China’s President Xi Jinping has spoken out against it and expressed his belief that stronger punishments for infringement and violators are needed. The Federal Reserve Bank of Minneapolis conducted a study in 2015 that determined that roughly half of all of the technology owned by Chinese companies was obtained by foreign companies.

IP theft is a major global trade issue because companies are unlawfully profiting from breakthroughs made by other companies. The incentive for business to innovate reduces and often leaves markets flooded with counterfeit products. This increases competition, thus reducing prices for businesses who spent the initial research and development money to improve their products. These businesses should therefore be able to charge more to recoup those costs of development.

When nations believe that other nations are stealing their trade secrets, the consequences can be severe. For example, President Trump claimed that one of the primary reasons why he levied such strong tariffs on China was to get back some of the money that American companies lost through intellectual property theft by Chinese corporations.

Despite the growing awareness around the issue and actions being taken to deal with it, intellectual property theft continues to be a major issue. In fact, multiple Chinese citizens working for Apple as engineers were recently arrested for attempting to steal trade secrets from Apple regarding the company’s upcoming autonomous vehicles.

3. Governments confiscating shipments

Although international trade companies have long been forced to worry about pirates from places like Somalia interfering with shipments on the oceans, governments are now actively intercepting vessels and their cargo on a much larger scale. For example, the nation of Iran has recently seized three oil tankers in the Persian Gulf.

Iran is doing this as a retaliation for the strict sanctions that the United States government has placed on it. Trump’s sanctions are an attempt to choke off Iran’s oil sales, which are the backbone of its economy. President Trump has long criticized the 2015 nuclear deal that was struck between the two nations, and is using the sanctions to try to pressure Iran to renegotiate the deal.

The recent seizures made by Iran have irritated President Trump. As a result, he has appealed to the United States’ Western allies to create a military force that can guard vessels passing through the Strait of Hormuz and other dangerous Middle Eastern waterways. Some of these allies, such as Germany, have said no.

It appears that many nations do not want to partake in the conflict between the United States and Iran.  Considering the fact the United States’ previous long, drawn-out conflicts with Middle Eastern nations were extremely unpopular with many nations, it is not a surprise that countries are not rushing to join the United States in a military conflict with Iran. This is especially true considering the fact that nuclear weapons are at the heart of the conflict.

There’s still lots of hope for the future of trade, despite current tensions

Thanks to increases in modern technology, international trade is still thriving. However, the extensive amount of rising tariffs, counterfeiting and intellectual property theft, and government seizures of vessels are all creating problems for global trade right now. These problems appear to revolve mostly around three nations: the United States, China, and Iran. All three of these nations have vastly different political ideologies and all three are very powerful.

It is unclear how the three nations will resolve the tension in the future. However, for people around the world who work in and depend on global trade, export numbers continue to grow worldwide. With new trade deals signed regularly, the hope will be that current problems can be solved quickly and peacefully.

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When looking at international trade as a whole, one of the several contributing factors that can lead to sudden fluctuations is political uncertainty, particularly between the world-leading superpowers. As the U.S. and China continue to apply new tariffs and impede trade with one another, we will be looking into their building trade war and how this is affecting international trade.

The impact on businesses

The U.S. and China trade war has been running on for a while now, with over 300 days’ worth of negotiations and increasing tariffs. But how has this affected business as a whole?

When you look at business in the U.S., as well as internationally, it is smaller self-made businesses that have taken the hit first. With many losing the money that they are putting into their businesses, small business owners are seeing an increase in costs without the increase in sales. Though this is not the case for every business, price increases are seeing some small business begin to struggle.

Changes to personal finances are affecting businesses too

In addition to the impact that the trade war is having on business directly, it is also important to note the indirect impacts on businesses as the personal finances of their customers are affected.

As trading tariffs continue to escalate, there can be a knock-on effect such as increased prices for necessities like fuel, as well as a wide variety of imported goods. As the price for necessities such as fuel continues to rise, economic growth can slow and many begin to struggle with their finances. While some consumers continue to spend with quickly approved same day loans or easy credit options, many consumers opt to put alternative saving techniques in place to ensure their ability to cover the rising prices without putting themselves in financial risk.

As prices increase and customers become more averse to spending, many businesses may find sales decreasing and costs increasing, a dangerous scenario for any business.

The hesitation to invest

With tariffs now set on $250 billion dollars of Chinese goods, with plans for more on an additional $300 billion of goods, and a tariff on $110 billion set on American goods, this tariff war has shown no sign of slowing down.

This has led many businesses to be hesitant to invest. As a result, there has been a drop in tech deals year to date compared to years past and is only set to decrease. This presents issues for tech giants such as Apple and Samsung, as their parts and phones are produced in China. As this political uncertainty continues to escalate, their stocks took a hit but soon recovered, However, this sharp fluctuation is leading many to hesitate when investing in certain markets.

Reduction in supply and demand

The final way that the U.S.-China trade deal is affecting international trade is the reduction in demand for many products. With China’s weak exports in the first half of 2019, this could mean problems for a number of their major trading partners, as the technology industry and other major fields will begin to feel the pinch. However, there has also been an 8.1% drop in exports from the United States, demonstrating a drop in the demand and the significant damage being done to both sides by this ongoing trade war.

As tariffs continue to rise and exports drop, a number of major companies will have to start to pay more. This has already started to take effect in the U.S. as the economy has begun to slow, affecting industries like construction, which relies on imported materials such as aluminium and steel. With technology expenses already on the rise, tariffs could further increase expenses and cause technology, fuel and other necessities to increase in price, and exacerbate the existing decrease in demand even more.

As this trade war continues with no deal in sight, this could have a profound effect on the global economy. Only time will tell whether this is set to improve or not following the next round of negotiations. Where will you start in adapting to this new economic reality?

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With his popular battle cry of “America First,” U.S. Pres. Donald Trump has vowed to re-negotiate or bring an end to free trade agreements he sees as detrimental to U.S. jobs and manufacturing.

Along with deals like NAFTA and the TPP, China has also often found itself at the center of Trump’s protectionist cross hairs. Trump’s attacks on China’s economic policies, and his threats against Chinese imports, have led to widespread speculation of a trade war between the world’s two largest economies.

So what would a trade war between the United States and China look like? And what is the possibility that such an economic showdown will come to pass?

U.S. claims against China

At the heart of the U.S. complaint against China is the size of the trade deficit between the two countries.

In 2016, the United States had a $347-billion trade deficit with China. That makes it the largest trade deficit the United States holds with any country — it’s five times the size of the country’s next highest trade deficit, with Japan.

In total, it adds up to more than 40% of the United States’ total trade deficit. However, it is worth noting that the United States’ trade deficit with China shrank by $50 billion since 2015, and U.S. exports to China are growing faster than Chinese exports to the United States.

As president, Trump also has continued his campaign claims that China severely manipulates its currency to the detriment of the United States. In a February interview with Reuters, Trump dubbed China the “grand champions” of currency manipulation. However, Trump’s claims don’t seem to hold up to facts, according to trade experts.

Former U.S. Pres. Barack Obama had labeled China as a currency manipulator before the financial crisis began nearly a decade ago. Since that time, China has adjusted its economic policy to favor domestic consumption over exports, which has brought change in its international exchange policies. In fact, according to the last U.S. Treasury report, China meets only one of the three criteria of being a currency manipulator: having a trade surplus over $20 billion. Another U.S. Treasury report on the matter is due out in April.

What a trade war could look like

Trump, however, has threatened tariffs as high as 45% on Chinese goods entering the United States. Some analysts have speculated that tariffs could target certain Chinese imports from industries with large surpluses over the U.S., such as the steel and furniture industries, or those from state-owned corporations. Trump also said during his campaign that he would make a priority of officially declaring China a currency manipulator.

Economists have projected that a 45% tariff on Chinese exports to the United States would lead to an 87% decline in those exports. The decline of $420 billion in exports would contract China’s GDP by 4.8%. Even minimal tariffs of 15% could lead to a 1.8% dip in China’s GDP, economists reported.

The effects of such tariffs wouldn’t only be felt by China, as they could retaliate against U.S. tariffs in a variety of ways.

Should China counter with its own set of tariffs against U.S. imports, the United States could see a major blow to its economy, as China is the 3^rd largest importer of American goods, behind Canada and Mexico. U.S. industries that would be particularly hard hit — those that rely heavily on Chinese imports — include manufacturers of air plane parts, automobiles and electronics, as well as growers of soy beans and corn.

The impact of tariffs on Chinese exports could have major impacts on American companies and families. There are many American-owned companies who export goods from China into the U.S., and an estimated 1.8 million U.S. jobs rely on Chinese imports. On top of that, Chinese imports save American households up to $850 a year.

Experts have projected that the impact on the world’s two largest economies would have a profound ripple effect on the global economy.

Will a trade war come to pass?

It’s yet to be seen whether the United States will make a move against Chinese imports that could lead to a trade war. While Trump has continued his “America First” and anti-China rhetoric, he has not set forth any policy affecting trade. However, U.S. Treasury Secretary Mnuchin did make headlines earlier this month when he refused typical G20 language rejecting protectionism during a meeting in Germany.

Chinese leaders are reportedly consulting with advisers and think tanks to determine how they should react to any potential U.S. trade policies targeted at Chinese imports. At the same time, Chinese trade officials have maintained that they would like to continue an open working relationship with the United States that is based on the development of mutually beneficial trade agreements. In fact the Chinese Foreign Ministry just announced plans for President Xi Jinping’s first meeting with President Trump at his Mar-a-Lago estate next week.

“Cooperation benefits both, while confrontation can only hurt.” – Chinese Commerce Minister Gao Hucheng said during a news conference in February.

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