COPENHAGEN (Reuters) -Global freight company DSV said on Wednesday that its customers are hastening a shift of production from China to other Asian markets due to escalating trade tensions and tariff concerns.
This trend of diversifying manufacturing, known as the “China plus one” policy, has intensified since the COVID-19 pandemic and the ongoing trade war between the world’s two largest economies.
“For some time our customers have moved more out of China and to the surrounding countries, and we’ve also seen that here in the first quarter,” Chief Financial Officer Michael Ebbe told Reuters. “That effect has been amplified (by current trade tensions).”
DSV, the world’s logistics firm, handles everything from shipments of single pallets to managing entire supply chains for multinational corporations.
China imposed a 125% tariff rate on U.S. exports on April 11 in response to a 145% tariff the U.S. government levied on Chinese goods.
The U.S. has also threatened to impose duties on other countries, including a 46% tariffs on Vietnamese goods.
“Many companies have moved volumes to Vietnam, but of course now there is also a significant duty there … so many have also diverted to Indonesia or Malaysia as well so it’s definitely something that is alive,” DSV CEO Jens Lund said.
DSV reported varied reactions to current tariffs, with some customers rushing shipments and others pausing orders. The company could benefit from more complex supply chains through its value-added services, which include customs clearance, cargo consolidation and supply chain intervention during disruptions, Ebbe said.
However, they cautioned that broader economic impacts could still hurt business if global demand is dampened.
Earlier on Wednesday the company posted in-line quarterly operating profit and better-than-forecasted synergies from its 14.3 billion euro ($16.27 billion) acquisition of Schenker, the logistics arm of German state rail operator Deutsche Bahn.
(Reporting by Stine Jacobsen; Editing by Freya Whitworth)
