The Impact of the USA-China 'Trade War' on the Bulk Bag Industry

The Impact of the USA-China 'Trade War' on the Bulk Bag Industry

Uncertainty is often the enemy of markets and industries. It’s been in the headlines for almost 2 years now – the “looming” trade war with China. Now, to be sure, we’re not here to analyze the dispute as a whole or pass judgement on whether it’s a full-blown trade war or simply the start of one. No matter what one may think of the current situation between the United States and China, there is no doubt it has created a great amount of uncertainty around the industries that source materials and products from Asia.

If you’ve been following our blog, then you’ll know that the vast majority of FIBCs are sourced overseas (primarily in Asia). That brings us to our topic today: What impact (if any) has the US-China trade situation had on the bulk bag industry? Let’s explore.

 

What is Causing the Uncertainty?

The primary source of uncertainty for any industry during the China-US trade kerfuffle is tariffs. Tariffs are essentially taxes on imports and/or exports between countries (for more information on tariffs, check out these sources: Britannica, Dictionary).  In the case of the US-China situation, certain Chinese products and/or materials have been targeted by the Trump administration and had tariffs applied to them. These tariffs can have a drastic impact on the price of imported goods IF foreign suppliers raise prices to make up for lost profits due to the new tariffs*. 

*Price changes from tariffs depend greatly on the supplier and the INCO terms in the shipment. These terms can shift the cost from the tariffs from importer to supplier and vice versa.  

However, as of this blog article, no tariffs have been placed on FIBCs imported into the US from China. If that’s the case, then the US-China trade situation shouldn’t have any impact on the FIBC industry, right? Not so fast. The situation is actually having a profound impact on the bulk bag industry, just not in the way you may think.

 

The Impact

As previously stated, right now there are no tariffs on imported bulk bags from China. However, the Trump administration recently put into place an additional tariffs on $200 billion dollars on imported Chinese goods (“list 3”). FIBCs were not part of list 3 and this most recent round.

The final round of tariffs (“list 4”) is considered an “all in” round and it will institute tariffs on all remaining Chinese products. Currently, there is no effective start date for list 4 – and thus the uncertainty. The Trump administration is in trade talks with China and has postponed instituting list 4, but the lack of a hard deadline has just added to the growing uncertainty around the situation.

The single biggest change we are witnessing is a geographic shift in suppliers. We have seen our own suppliers investing heavily into their facilities in India and witnessed growth in FIBC manufacturing outside China. This has resulted in a massive expansion of new facilities in India, Thailand, Malaysia and other countries that surround China. Chinese suppliers used to make up a large portion of the FIBC supply chain, but these industry changes have led to other countries becoming big players in terms of production. These changes have impacted our supply chain as well as our own purchasing from China has slowed. It is important to note however that Chinese suppliers still remain a vital part of our supply chain.

 

What Does this Mean for Bulk Bag Buyers?

By far the most important question in all of this is what does this mean for buyers and bulk bag prices? As of right now, not much. Not only are FIBCs not currently on the list of products in which tariffs are applied, quality distributors in the US have taken proactive steps in stride with overseas suppliers to ensure that IF tariffs are applied to FIBCs sourced in China, alternative sources are available thus minimizing the impact on price and availability.

 


 

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February 23, 2019

Categories: Bulk Bags

About the Author: Zach Johnson

Zach Johnson is an Account Manager at National Bulk Bag.

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