News / Trade tension and tariffs force multinationals to eye China-centric supply chains

Photo 269220610 | Astrazeneca China © RobertWei | Dreamstime.com

With the US-China tariff war showing every sign of worsening, multinational firms are considering building independent supply chains for the US and China.

Leading pharmaceutical company AstraZeneca has announced plans to establish manufacturing plants in China to serve the region exclusively.

For China-focused forwarders, the news represents a beacon of hope that the logistics industry may be shielded from the worst of the tariff and tension fallout.

A spokesperson from Dimerco told The Loadstar the move by AstraZeneca demonstrated companies’ faith in China’s self-sufficient consumer market.

“They clearly believe China’s huge consumer market can support its own supply chain. China will obviously remain a key source of supply globally and a key consumer market for growth-minded brands.”

Previously, some industries caught up in the US-China tariff war have seen a drop in export volumes, bringing “uncertainty and pressure to the logistics industry as the profit margin decreases”, said Alex Zhong, general manager at Chinese freight service agency FBASZ, based in Shenzhen.

Together with external factors like the Red Sea crisis, companies are “unsure about prospects” and unable to strategise effectively, he added.

“A lot of warehouses and supply chain management companies are firing people and scaling down to cut costs. We’ve not been optimistic about the future.”

Businesses returning to China with expansion plans may be the boost the industry longs for, however. He believes companies setting up separate supply chains in China is “beneficial” for everyone involved.

“It’s a fantastic thing for businesses and the government. [Foreign companies] building supply chains in China can facilitate economic activities in the region, reviving and strengthening logistics while fostering growth in other relevant sectors and neighbouring regions.”

Although forwarders are hopeful about the trend, its positive impacts may not be felt for some time, and there some obstacles ahead.

Hing Kai Chan, professor of operations management at the Nottingham University Business School China, said the logistics industry should prepare for “short-term disruptions” before firms could “finally establish a stable supply chain for the long run”.

He explained: “There’s always a very steep learning curve when you try to relocate a supply chain. From sourcing raw materials to training to moving factories, these costs can cause short-term disruptions, such as delayed shipments, price increases and shortages of supply, which will affect production schedules and output capacity.

“But these effects will be short-term most of the time, and unlikely to be serious. Once the market finds its equilibrium, everything will be back to normal.”