[By Guancha Observer Network, Liu Chenghui]
"The U.S. government can shout all it wants, but how to replicate products exported from China to the U.S.? It's simply impossible."
How difficult is it to break free from China's supply chain? Michael Einhorn, CEO of American medical supplies company Dealmed, once tried to do so and let out such a sigh.
An article published on Fortune magazine's website on June 8 described how Einhorn, who had once supported Trump's agenda, had attempted to move his company's supply chain out of China more than once, only to fail each time. Einhorn found that China's advantages in medical manufacturing had become unshakable: its level of automation, product quality, price competitiveness, as well as the vast scale of its industry and infrastructure made Chinese products more advantageous even with high tariffs added.
This article concluded that Einhorn's experience was a microcosm of many American businesses, revealing the reality of today's global supply chains: in critical areas like healthcare, China's dominance is short-term irreplaceable, and cutting ties with China is not a viable option.
American medical supplies company Dealmed CEO Michael Einhorn, Fortune Magazine
"Getting rid of Made in China? Simply impossible."
In 2006, Einhorn founded Dealmed from scratch. Today, the company has become one of the largest non-private equity-controlled manufacturers and distributors of medical supplies in the New York, New Jersey, and Connecticut markets.
Einhorn had wanted to exit the Chinese market; he really thought about it. He supported Trump's agenda—reducing regulation, lowering corporate tax burdens, canceling environmental instructions that drove up energy prices—and once believed Trump's claim that "China cheats in trade."
Therefore, when Trump raised tariffs on China to 135%, Einhorn thought he could find good alternative sources for the ten thousand products he sold to clinics and healthcare institutions across the U.S., including masks, gauze, testing equipment, and surgical attire.
This wasn't even Einhorn's first attempt to make his company less dependent on China. During the pandemic, Trump's initial round of tariffs increased import costs. Einhorn pieced together a group of suppliers, reducing China's share of the company's imports to 15%.
How difficult would it be to repeat this strategy now?
But reality dealt him a hard blow.
Einhorn found that the manufacturing world had undergone dramatic changes in just five years, and what once seemed feasible now made no financial sense at all.
"China dominates most areas of medical manufacturing," Einhorn told Fortune. "Their automation, quality, and pricing are better."
Despite insisting he believed there were "problems with China's trade practices," he had to admit: "In my field, the reality is like this. China leads far ahead, and leaving it would only hurt ourselves."
Fortune magazine considered Einhorn's experience highly instructive, revealing the rapid progress of China's manufacturing, the scarcity of feasible alternatives in certain industries, and ultimately, even considering tariff factors, many companies seeking to leave China still cannot do so.
"The government can shout all it wants, but how to replicate products exported from China to the U.S.? It's simply impossible," Einhorn said.
2025 Jiangsu International Medical Equipment Expo, Visual China
"Diversification doesn't work; clients still only look at cost"
About a decade ago, Dealmed's purchases from China accounted for only 15% of its sales, mainly for basic products like tapes and surgical gowns. Einhorn pointed out that at that time, the quality of China's high-end products did not meet European and American standards.
In 2014, Einhorn transformed from a pure distributor to a manufacturer. He found that by eliminating intermediaries and directly contracting production with Chinese factories, he could save costs. Initially, he outsourced basic products like masks and towels to China. As China's manufacturing capabilities improved, he also placed orders for on-site testing devices and other high-end products.
By 2018, 80% of Dealmed's branded products were imported from China, and this new business accounted for 30% of the company's total revenue. Adding the traditional business of distributing Chinese products, the overall revenue from China reached 45%.
However, Trump's tariff offensive against China prompted Einhorn to make his first major adjustment.
In September 2019, the U.S. government imposed a 10% tariff on some Chinese medical imports, which was then expanded to 25% in 2020. Einhorn realized that America's tough stance toward China might become a long-term policy.
Thus, Dealmed transferred the procurement of surgical gowns and operating table covers back to the U.S., despite costs being 15% higher. Testing equipment was also moved to U.S. production. By the end of 2019, glove production shifted from China to Malaysia, and the company found new suppliers in Mexico, Canada, Vietnam, and India. Before the outbreak of the pandemic, the proportion of revenue from imports from China had dropped to 15%, down two-thirds from its peak two years earlier.
"The goal at the time was to relocate all production out of China," Einhorn said.
But he didn't expect that this situation wouldn't last long.
After Chinese manufacturers resumed operations in the spring of 2020, Einhorn witnessed the huge profits they earned. At that time, Dealmed still purchased large quantities of Chinese masks, with prices reaching $2 each, seven times higher than before the pandemic.
"Initially, customers said 'We can no longer rely on China' and encouraged us to diversify our procurement channels," Einhorn recalled. "We said we had achieved the broadest global reach."
He said that hospitals and healthcare institutions abandoned their brief enthusiasm for diversified supply chains and sought the lowest prices instead, buying wherever it was cheapest.
Einhorn said, "As memories of the pandemic fade, the degree of diversification becomes irrelevant to our clients."
He lamented that the supply chain diversification his company implemented brought no advantage; everyone only looked at price, and insurance companies only reimbursed the lowest cost. "You say the product is made in the U.S., Vietnam, or Malaysia? It makes no difference."
In May 2020, a production line of a Zhejiang medical company. Visual China
Back to China again
While the American healthcare industry searched globally for the "lowest price," China's medical manufacturing industry began to expand significantly in terms of scale and expertise. The significant improvements in China's medical industrial engine triggered another shift for Dealmed.
"We grew rapidly, adding hundreds of new products in the two years after the pandemic," Einhorn said. "Some products returned to China. I moved one product from China to Vietnam, and then a new product went back to China."
"During this process, we realized that the best source was China," he sighed. Chinese manufacturers became more enterprising after the pandemic, doubling down on R&D investment, making China-made quality superior to any other country in the world.
"No other country can match China's level of automation and capacity. They have become very mature."
"Most importantly, China offers the lowest prices," Einhorn said.
Regarding Biden's crackdown on China's tech industry and additional tariffs on medical equipment, he said that China had been prepared, starting factories in Vietnam two years ago and relocating some production lines there. However, these factories were still under Chinese capital control. As a result, many paper products and testing equipment that Dealmed originally transported from China were not affected by the 301 tariffs.
"I will transfer some products, but we still consider China our main supplier," Einhorn said. After the pandemic, China's manufacturing made significant progress. Many manufacturing contracts he once transferred from China to Malaysia, the U.S., and Canada eventually returned to China.
He found that not only were prices generally higher in Vietnam and other Asian countries, but the quality was also inferior to China-made products, with product variety and infrastructure falling short compared to China. These infrastructures promoted economies of scale and ensured manufacturers had sufficient capacity to meet surging orders.
Einhorn admitted that over 40% of his company's revenue now came from Chinese-made products, roughly returning to the peak of 2018.
In response to the current U.S.-China trade conflict, Einhorn believes Trump won't succeed.
"People mistakenly think Chinese manufacturers bear the tariffs, but in fact, it's American hospitals and clinics that shoulder them, not Chinese exporters, and the costs are ultimately passed on to individuals and companies paying premiums," Einhorn said.
Einhorn said he certainly wanted to do business in the U.S., but issues like extremely high labor costs and mandatory purchase of expensive electricity put American companies at a disadvantage on the global stage.
"There must be a series of incentives to lower the costs of American manufacturers," he said. "Unless we can match China in both quality and price, my clients won't pay higher prices just because the product is made in America."
"Cutting ties with China is not a viable option," he said.
This article is an exclusive contribution from the Guancha Observer Network and cannot be reproduced without permission.
Original article: https://www.toutiao.com/article/7513747722826940940/
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