Trump is pushing ‘Buy American.’ But customers (mostly) don’t care

  @byHeatherLongMarch 13, 2017: 9:01 AM ET

Cathy Paraggio always checks the labels on stuff she buys: Is it made in China? Vietnam? Bangladesh? Mexico? Or America?

She was a big believer in the “Made in the USA” movement long before President Trump started telling the nation to “Buy American and hire American.”

In 2012, Paraggio launched a male swimsuit brand called NoNetz. It makes swimsuits that prevent chafing and rashes. Paraggio vowed to make the suits in the U.S. She found a textile factory in Brooklyn, MCM Enterprise, that could do the work.

There was just one problem: The suit cost $23 to make in Brooklyn. Making it in China and shipping it to Paraggio’s office cost a mere $10.

Manufacturing in America “makes me look like a bad business person,” Paraggio told CNNMoney. She went with the Brooklyn option anyway. Surely, she thought, customers would prefer to see the “Made in the USA” label.

That’s not what happened.

“No one cares about Made in the USA,” says Paraggio, who recently ordered some suits from China for the first time after Daymond John of Shark Tank gave her frank advice to get real about the bottom line. So she placed the order. And cried.

Trump preaches “Buy American” often. He mentioned it in his Inaugural Address. He brought it up in his first prime-time speech to Congress (watched by over 47 million people). He made it a campaign issue.

But the largest obstacle to Trump’s vision may be the American shopper, who is constantly on the lookout for a good deal.

Related: Rust Belt voters made Trump president. Now they want jobs

Americans care most about price

In survey after survey, Americans say they prefer to buy “Made in the USA” products. But when it comes to actually spending, their choices tell a different story.

“Consumers are all for Made in America until they have to pay for it,” says Greg Portell, partner at consulting firm A.T. Kearney who specializing in advising retailers.

Related: This Michigan toymaker pledged never to go to China

People have grown accustomed to cheap prices after years of shopping at discount retailers like Walmart (WMT) and Target (TGT). In general, they only buy American if it doesn’t cost much more than the product from China or Germany or Bangladesh.

Paraggio saw this trend first-hand in her business. She gets two frequent comments from customers: They love the product, but why does it cost so much?

An Associated Press-GFK poll last year found nearly 75% want to buy American. But their first preference is to buy the cheaper item. The Boston Consulting Group, which has studied the issue for years, found it’s a bit more complicated. When people go to the store, they also consider quality.

Eighty-five percent of U.S. consumers think American-made products are better quality than those made overseas, BCG found. And they are willing to pay a premium for some products that are Made in the USA. For baby formula they’ll pay a lot more. For shoes, they won’t.

“Clothing is one of the things that is very hard to reshore. It’s a tough road to go,” says Hal Sirkin, a senior partner at BCG.

Overall, BCG estimates companies can charge up to about 5% more for American-made.

 

Businesses react to the bottom line

Trump certainly understands this labor math. Some of his own clothing line is made in China.

Chung Yu owns the factory in Brooklyn where Paraggio has been manufacturing the NoNetz swimsuits. He’s been in garment-making for 35 years, but he’s worried about staying in business at a time when New York has raised the minimum wage. It New York City, employers who have a staff of 11 or more, have to pay $11 an hour. That will go up to $15 an hour by the end of 2018.

“In China, it’s $2 or $3 an hour. And even China is getting too expensive. Retailers are switching to countries like Bangladesh,” Yu explains.

Yu’s factory is still pretty busy, but it’s almost all small orders of about 300 items or less. Most of his clients are small businesses like NoNetz. As soon as they hit a certain scale, they typically jump overseas for production.

“People think Made in America is better quality, but that’s not true,” Yu says, frankly. “It all depends on the quality of the machines and labor.”

Yu won’t say who he voted for, but he says thanks to Trump, everyone in his world is talking about “American made” again.

“When we hear how Trump will bring manufacturing back, we’re excited,” Yu told CNNMoney. “But we have to see how he will implement it.”

Chung Yu Brooklyn
Chung Yu owns MCM Enterprise, a clothing manufacturer in Brooklyn.

What could come back to the U.S.

There’s a lot of debate about whether Trump can bring manufacturing, let alone manufacturing jobs, back to the United States. Robots and automation have also taken some (if not a large part — Ball State University says 88% of manufacturing job losses come from automation) of the jobs.

Experts say it’s going to take more than a “buy American” promotional campaign to make it to happen.

The research BCG has done suggests that some industries are more ripe to come back to the U.S. than others. The reality is wages have been rising in China and elsewhere in the world, making it less attractive to make certain products there.

“Computers and appliances are at a tipping point,” Sirkin says. “We’ve seen manufacturing costs overseas go up for those industries.”

Clothing, however, is one of the least likely processes to return, BCG found.

“How could you possibly buy shorts for $5 and have it made here. You absolutely can’t. I’ve tried,” laments Paraggio.

CNNMoney (New York)First published March 13, 2017: 6:25 AM ET
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China’s manufacturing sector expands again in October amid steady economic growth

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Manufacturing in China expanded last month, surveys released on Tuesday showed, indicating Beijing has more leeway to focus on safeguarding against asset price bubbles and carry out economic reforms rather than introduce measures to boost the nation’s slowing economy.

China’s official manufacturing purchasing managers’ index, which mainly reflects conditions at state-owned companies, came in much better than analysts expected at a more than two-year high of 51.2 last month, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while one below means contraction.

The previous month’s reading was 50.4.

He said the central bank would keep its current prudent monetary policy unchanged, refraining from further tightening of interest rates or measures to increase money supply.

China’s economy grew at the slowest pace in 25 years last year and the authorities are attempting to shift its growth model away from debt-fuelled development and traditional manufacturing towards the service sector and high-tech industries.

Zhou Hao, a Commerzbank economist, wrote in a research note that the significant improvement in the index was largely driven by rising commodity prices, reflecting massive speculation in China markets.

He noted the overall policy tone has turned less dovish in favour of tighter monetary policy as the economy was improving, but concerns remained over increasing asset bubbles.

More than 20 cities launched measures to curb housing prices early last month. China’s Politburo also held a meeting on October 28, stating preventing asset bubbles was a goal of monetary policy.

Zhao Qinghe, a senior statistician at the bureau, said on its website that the strong expansion was partly due to recovering demand, plus rising industrial prices thanks to Beijing’s efforts to retire obsolete production capacity.

However, he also pointed out that downward pressure remains as new exports orders dropped 0.9 to 49.2 and new imports orders fell to 49.9 from September’s 50.4.

The official purchasing managers’ index outside the manufacturing industry edged up by 0.3 percentage points last month to a high this year of 54, signalling a pickup in growth in the services sector.

The Caixin China General Manufacturing PMI, which is slanted towards smaller privately owned companies, gained to 51.2 in October, the highest since July 2014, from September’s 50.1, according to a separate survey compiled by Markit on Tuesday.

“Beyond that, however, the recovery is likely to stall as the boost from stimulus fades, re-exposing the structural drags that continue to weigh on the economy,” he said.

SOURCE:  South China Morning Post, Tuesday, 01 November, 2016

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Foreigners buying directly from rubber farmers

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**MY RECOMMENDATION:  This may be an opportunity to renegotiate your rubber commodity-based buys to capitalize on lower raw material costs to your suppliers….Tom

While the local rice market is mired in a deep slump due to oversupply, the rubber trade has begun to pick up, with foreign buyers now seeking to buy directly from planters and bypassing the futures market. Foreign…

http://www.bangkokpost.com/business/news/1122281/foreigners-buying-directly-from-rubber-farmers. 

Bangkok Post, October 29, 2016 © Post Publishing PCL. All rights reserved.

 

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Thailand ready to facilitate Indian investment: Thai PM

 

 

New Delhi, June 17 (IANS) Thailand on Friday said it would further facilitate investments by Indian firms in the Southeast Asian nation and resolved to increase Thai investments into India, following the first meeting of the India-Thailand Joint Business Forum here during the ongoing visit of Thai Prime Minister General Prayut Chan-o-cha.

“I am ready to waive rules that are obstacles so as to facilitate Indian business. Thailand would like Indian investors to come and invest in our priority sectors like information technology, pharmaceuticals, auto-components, and machinery,” General Chan-o-Cha told a gathering of business leaders from both countries at an event here hosted jointly by the three industry chambers FICCI, CII and Assocham.

“Besides, there are many opportunities for Indian business in the wider Asean (Association for Southeast Asian Nations) region. Thailand can be like a forward base for Indian investors to Asean,” the Thai Prime Minister, who is on a visit to India, said.

The Thailand Prime Minister, who held delegation level talks with Prime Minister Narendra Modi earlier in the day, invited Indian investments under the country’s cluster development policy.

The joint statement issued after the talks said that both sides will also be renegotiating a new bilateral investment treaty.

The India-Thailand Joint Business Forum has recommended a target of doubling bilateral trade from the current $8 billion level to $16 billion in the next five years. Following its first meeting the forum said it would explore trade in new products and services.

In a bid to attract more tourists from Thailand, India on Friday announced that it will facilitate double entry e-tourist visas for Thai citizens.

Thailand is also interested in development of the Buddhist tourist circuit in India, Chan-o-Cha told the business meeting.

SOURCE:  THE TIMES OF INDIA–IANS  | Jun 17, 2016, 11.15 PM IST

 

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