A company supplying LCD TV components to major domestic electronics firms is closely monitoring industry trends amid reports that the U.S. has raised tariffs on China. The company expressed concerns about the potential impact on its operations in China, fearing that major manufacturers may adjust their supply chains, deepening its worries.
Small and medium-sized enterprises (SMEs) with production bases in China are increasingly alarmed by the intensified push to exclude Chinese products from the market. Although they opted for 'Made in China' to maintain price competitiveness, U.S. tariffs have increased their cost burdens. Experts warn that the necessary adjustments to supply chains by large domestic firms could exacerbate the financial difficulties faced by small partner companies.
According to industry sources, as of July 24, domestic companies exporting products made with forced labor to the U.S. are subject to tariffs of up to 12.5%. This follows new tariff measures implemented by the Trump administration under Trade Law 301.
Until February, companies were subject to a 10% global tariff under the International Emergency Economic Powers Act (IEEPA). However, as soon as that tariff expired, the U.S. government confirmed a new tariff that is 2.5 percentage points higher, further increasing the cost burden on businesses.
Experts believe that the entire export manufacturing sector, including petrochemicals, battery materials, machinery, home appliances, and electronic components, is affected. While items like automobiles and auto parts, which are subject to Section 232 tariffs, are excluded from this measure, rising export costs for basic materials and intermediate goods to the U.S. will inevitably lead to increased costs across the entire supply chain for finished products. Additionally, if the U.S. implements excess production tariffs based on Trade Law 301, the burden on companies will increase further, with a decision expected by March 11 of next year.
The challenge lies with small and medium-sized enterprises that lack the capacity to respond as effectively as larger firms. Partner companies with production bases in China find it difficult to establish alternative production sites or secure large amounts of funding for such moves. Maintaining factories in China risks exclusion from large firms' supply chains, while relocating to other countries often incurs prohibitive costs. This situation is deepening the concerns of small partner companies.
For years, the ongoing U.S. tariffs have intensified profitability pressures on partner companies. Recently, a first-tier supplier to Hyundai Motor Group expressed strong opposition after the group requested a cost reduction plan of up to 20% by 2027. In the first half of this year, Hyundai and Kia paid tariffs amounting to 1.76 trillion won and 1.57 trillion won, respectively.
Moreover, many small businesses, lacking trade expertise, are unaware of what Trade Law 301 entails or how it will impact them, leaving them in a state of uncertainty. One small business representative stated, "The impact of tariffs on intermediate goods directly affects our clients' costs, so we are closely monitoring the situation. However, we are frustrated that finished product companies have yet to provide clear guidelines."
* This article has been translated by AI.
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