With President Donald Trump slapping tariffs on items like car gaskets and ignition wiring sets in July, American buyers of the company’s LED car lights pushed hard over the summer to get their orders delivered early in case they got caught up in the next salvo. Now, with the U.S. poised to target another $200bn of Chinese goods as soon as this week — including the car lights made by E.D. Opto — export manager Melissa Shu wonders what’s going to happen to the business.
“If the tariffs are implemented, we’ll have trouble selling our products,” Shu said. “Customers might ask us to reduce our prices but the cost of raw materials has been soaring.”
As relations between the U.S. and China deteriorate, small suppliers like the car light manufacturer and their U.S. customers are being caught in the middle. Auto-parts makers were already grappling with spikes in the cost of steel and aluminum, and now the trade war is threatening to upend an industry that’s become increasingly dependent on the U.S. China’s exports of auto parts to the U.S. increased almost 18 percent between 2012 and 2017 to hit $17.6bn last year, according to data from the U.S. Commerce Department.
Companies such as E.D. Opto, which has only 125 employees and exported about 50m yuan ($7.3m) in parts last year, are in the direct line of fire. Further down the supply chain, David Ni’s company buys aluminum alloy wheels from Chinese makers and exports them to retail outlets in the U.S. He’s weighing whether to give up some of its thin profit margin to hold onto customers. The company will likely raise its prices as much as 5 percent at the same time.
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