Reference News Network, July 14 report: According to the Bloomberg News website on July 11, when a $80,000 tariff bill landed on Haley Pavone's desk in May this year, she did what many small business owners might do: freeze hiring and add an online payment surcharge to help cover the tariff costs.

As the founder of Pashen Shoes, a company based in California that imports shoes from China, Pavone did not move production to another country. Not because she hadn't tried, but because like many others, she found it wasn't a viable option.

Since President Donald Trump returned to the White House and raised tariffs on Chinese goods, Pavone has examined factories in Brazil, India, and Vietnam.

But she quickly ran into problems: they all required larger minimum order quantities, and the workers lacked training. Even if she could find a company with skilled workers, they still needed to import key components from China.

A pair of laced heels produced by a factory in Vietnam was found "not elegant enough." Therefore, despite the fact that the tariffs on some of her products reached a staggering peak of 190% in April, she decided to temporarily continue working with existing suppliers.

With U.S. tariffs on Vietnam now approaching the level of those on China, there is less incentive to shift production outside the world's second-largest economy.

Pavone, 29, said: "There's nowhere like China. The skill and knowledge levels of the workforce across different industries in China far exceed anywhere else."

Pavone's dilemma is a common situation faced by companies around the world that rely on U.S. consumers and Chinese manufacturers. According to Roubini Advisory, efforts to reduce dependence on China since 2017 have largely focused on the textile, electronics, automotive, and assembly industries, but companies in these sectors are still often heavily reliant on raw materials from Chinese enterprises.

Analysts including Agatha Klatz wrote in a report this year: "No country can scale up to replicate China's highly optimized production ecosystem, so companies remain slow in shifting to other production centers."

The level of capacity transfer may be even lower than the data reported in the news. A new study by a team of scholars from institutions such as the World Bank and the International Monetary Fund shows that since 2017, when calculating the surge in imports of goods that meet the minimum duty-free threshold—goods priced below $800 that can avoid tariffs—and Chinese goods imported through third countries, the relief of U.S. reliance on China is less than people think, decreasing by only 6 percentage points instead of 8 percentage points.

The research team led by Caroline Freund, Dean of the School of Global Policy and Strategy at the University of California, San Diego, said: "Compared to Mexico or Vietnam replacing China in the U.S. market, China is more replacing itself."

Recent trade data highlight this change: China's exports to the U.S. have dropped significantly, but its exports to Southeast Asia have surged. However, freight volume from Southeast Asia to the U.S. has also increased sharply. This indicates that the U.S. still has a large demand for goods and components from China.

The U.S. and China have reached a trade "understanding," which means Pavone and importers like her no longer face the most extreme tariffs.

Pashen Shoes' retail price is around $200 per pair. Tariffs are eroding profits, but Pavone says the industry is still profitable at present. (Translated by Liu Xiaoyan)

On April 20, workers were seen working on a shoe production line in the Desai Science and Technology Park in Wenzhou, Zhejiang Province. (Xinhua)

Original article: https://www.toutiao.com/article/7526808376441930240/

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