The China Tariffs and Tier 2 and 3 Suppliers

In the meantime, American Tier 2 and 3 suppliers are actively thinking over their China policy. While current tariff politics has put immense pressure on Tier 2 and Tier 3 suppliers doing business in China, they had already been dealing with the other challenges. These challenges include the increasing cost of labor, higher standards in terms of compliance, more competition from state-controlled entities (SOEs), and less market access. American trade negotiators were addressing these challenges with demands that China limits SOEs and eliminate the market access limitations on the private sector.

Both tariff and non-tariff barriers cause cost increase to material, supplies, and products, making it difficult for Tier 2 and Tier 3 suppliers from both countries to do business in each others markets. In addition to raising costs for Tier 2 and 3 manufacturers, the tariffs have begun to affect retailers and consumers. Experts anticipate that if the trade war is ongoing and prices continue to rise, production volume and revenues will decrease. The results could be companies shrinking, going out of business, and increasing rates of unemployment. Both nations will not be capable of maintaining the trade war without being affected, and if the situation persists, it could result in a new global recession. 

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