Canada Markets open in 8 hrs 5 mins

Trump's trade war with China is causing CEOs to make one risky change

Brian Sozzi
Editor-at-Large

The big guns ruling the corner offices of Corporate America Inc. aren’t waiting for President Trump to declare an end to his nasty trade war with China to upend supply chains in the low-cost manufacturing capital of the world. Nope, they are shooting first and asking questions later.

Fearing a prolonged trade battle with China — and a barrage of negative headlines and unknown retaliatory tariffs — numerous CEOs Yahoo Finance have talked with lately are moving quickly to get production outside of China before the end of 2019. Interestingly, manufacturing isn’t being shifted back to the U.S as Trump no doubt wants ahead of his 2020 reelection campaign.

Instead, execs are looking to the likes of Korea, India, Vietnam, and other emerging markets to keep production costs somewhat in line with those enjoyed for decades from cheap labor in China. In most cases, the cost of production will go up next year — to the detriment of profit margins — amid the new supply chains. Further, with new supply chains come the potential for order delays as kinks are worked out.

But execs think these are worthy trade-offs to avoid getting stuck in the middle of a protracted U.S. trade war. Others believe moving manufacturing out of China will help them get products to U.S. markets faster.

Here are three recent examples.

GoPro is pulling its camera production for the U.S. market out of China. Image: Bloomberg

GoPro

GoPro said Monday it’s pulling its camera production for the U.S. market out of China by summer 2019. Production will continue in China for GoPro cameras not destined for the U.S.

In an interview with Yahoo Finance, GoPro founder Nicholas Woodman declined to comment on what countries will get GoPro’s production. It’s unclear if GoPro could profitably make its action cameras in the U.S. given heightened competition in the camera category.

GoPro designs and develops its products in the U.S., France, China, and Romania, according to its annual report. A “significant majority” of GoPro’s production is outsourced to manufacturers in China, Japan, and Malaysia, the company says.

Funko

Toy makers for years have used China to make products — that sport thin margins — dirt cheap. That is beginning to change at the hands of the U.S. trade war with China.

Funko CEO Brian Mariotti tells Yahoo Finance the collectible toy maker will have 75% of its manufacturing outside of China by the end of 2019. Currently, about 50% of its products are made in China. Funko also relies on Vietnam, Mexico, and the U.S. to source.

“We are not affected by the tariffs right now, but what we are looking at is why we would produce outside of China — cost of goods, speed to market and quality of goods — and we have found we are having more success outside of China than we are within,” Mariotti says.  

Hasbro

The maker of Transformers, Nerf, and Monopoly toys is also shifting its sourcing. Hasbro currently produces 70% of its products in China, but that number is expected to drop to 60% over the next two years. Hasbro will also soon bring back Play-Doh manufacturing to a Massachusetts-based site.

“We continue to look at all our global sourcing and manufacturing,” Hasbro CEO Brian Goldner tells Yahoo Finance. Goldner says some board game production will shift to the U.S., as well.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

Read Yahoo Finance’s Exclusives:

Hasbro CEO: We will return to growth in 2019

Macy’s CEO: Mobile shopping is surging

Procter & Gamble CEO: We aren’t splitting up the company

Coca-Cola CEO: Why we aren’t getting into the alcohol business

Hershey CEO: We are having a game-changing year

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.