The Trade War With China Is On The Journal | March 5, 2025
Hosts: Kate Linebaugh, Ryan Knutson, Jessica Mendoza
Guests: Steve Greenspan, CEO of Honey Can Do
Production: Spotify and The Wall Street Journal
1. Setting the Scene: The Chicago Homeware Trade Show
Timestamp: 00:08 - 01:04
The episode opens at the largest homeware trade show in the United States, held at a bustling Chicago convention center. Hundreds of vendors showcase a diverse range of products—from insulated vegan leather lunch boxes and car diffusers to innovative pottery and home organization tools.
Kate Linebaugh sets the stage by highlighting the vibrant atmosphere and the array of products on display. However, amidst the excitement, a palpable concern looms over the event: the impact of newly imposed tariffs.
Unnamed Industry Expert: “There's a lot of talk about tariffs.”
Steve Greenspan: “Everyone's thinking about it. We're telling our larger customers that the tariffs are going to become higher and it's going to affect us. I'm a little bit worried. It's a challenge, you know, like everybody.”
Timestamp: 00:44 - 01:04
2. The Genesis of the Trade War
Timestamp: 01:04 - 02:21
The discussion delves into the recent tariffs imposed by former President Trump on Chinese imports, a move aimed at curbing the flow of chemicals used in fentanyl production. These tariffs have sparked significant uncertainty and concern among American manufacturers who rely heavily on Chinese manufacturing.
Kate Linebaugh introduces Steve Greenspan, CEO of Honey Can Do, a company specializing in home organization products. With substantial revenue and major retail clients like Walmart and Amazon, Steve's business is directly impacted by the evolving trade policies.
3. Navigating Beyond Chinese Manufacturing
Timestamp: 03:12 - 07:57
Steve Greenspan shares his journey of building Honey Can Do from the ground up in 2007, initially relying heavily on Chinese manufacturing due to its established infrastructure, low labor costs, and high-quality production capabilities.
However, the imposition of tariffs in 2018 marked a turning point. In response, Steve began relocating production to Southeast Asian countries such as Cambodia, Thailand, Vietnam, and Indonesia to circumvent increased costs.
Unnamed Industry Expert: “We're moving significantly more to Cambodia, Thailand, more in Vietnam and Indonesia as well.”
Timestamp: 01:27 - 01:35
This strategic shift involves substantial investments, including training new employees and establishing infrastructure from scratch—a process described by Steve as "exceedingly difficult" and "disruptive."
Steve Greenspan: “You don't wake up dreaming of McDonald's fries. You wake up dreaming of McDonald's hash browns. McDonald's breakfast comes first. But I...” Note: This quote appears out of context and seems unrelated to the discussion.
Challenges Faced:
-
Infrastructure Limitations: Unlike China’s extensive highway networks, countries like Vietnam face significant logistical hurdles.
Unnamed Industry Expert: “In China, they have a very wide network of multi lane highways that can bring you just about anywhere that you would need to go... It might take you four hours in Vietnam to do the same distance.”
Timestamp: 06:49 - 07:26 -
Port Delays and Higher Costs: Vietnam lacks deep-water ports, leading to shipping inefficiencies and increased pricing, though still more affordable than Chinese tariffs.
Unnamed Industry Expert: “But it's still cheaper than paying the tariffs.”
Timestamp: 07:46 - 07:57
Despite these challenges, shifting production remains a financially viable option to mitigate tariff impacts.
4. Escalation: Renewed Tariffs and China's Retaliation
Timestamp: 07:57 - 10:23
The trade tensions escalate as President Trump reinitiates the trade war by imposing additional 10% tariffs on Chinese imports in February 2025, followed by another 10% the subsequent day. These measures target to hinder the production of fentanyl, with China responding aggressively.
China’s Stance:
Government Spokesman: “If war is what the US wants, be it a tariff war, a trade war, or any other type of war, we're ready to fight till the end.”
Timestamp: 07:57 - 08:50
In response, Steve accelerates plans to further reduce reliance on Chinese manufacturing, increasingly turning to Southeast Asian nations like Cambodia, Vietnam, and Indonesia.
Steve Greenspan: “We're trying to accelerate it if they have the means to move out to Southeast Asia.”
Timestamp: 08:50 - 09:08
He emphasizes that relocating production back to the U.S. is not feasible due to inadequate infrastructure and higher labor costs.
Unnamed Industry Expert: “Making these types of products within the U.S. the infrastructure doesn't exist and we don't have competitive labor to be able to do these things.”
Timestamp: 09:12 - 09:39
5. Ripples Through China's Manufacturing Sector
Timestamp: 11:00 - 14:24
The renewed trade war significantly impacts China's substantial manufacturing sector, which is a cornerstone of its economy. Companies face confusion and panic over the unpredictable nature of the tariffs.
Steve Greenspan: “People are definitely confused, fearful, panicked even... It's really hard to predict his next steps.”
Timestamp: 11:14 - 12:13
Chinese manufacturers are in a state of flux, with many contemplating or actively relocating their production facilities to Southeast Asia to evade the tariffs.
Steve Greenspan: “If Trump just put another 10% tariff on Chinese imports... these companies are in a panic and they're just grasping for any Solution.”
Timestamp: 12:51 - 13:33
Impact on China's Economy:
- Dependence on Exports: China's economy, heavily reliant on exports, faces significant strain as production shifts abroad.
- Domestic Challenges: Weak consumer demand and a struggling property market exacerbate economic vulnerabilities.
Steve Greenspan: “China's economy is quite reliant on exports right now... tariffs are definitely hitting China where it hurts at the moment.”
Timestamp: 14:24 - 14:28
6. The Unintended Consequences and Future Outlook
Timestamp: 15:14 - 17:39
As more manufacturing exits China, concerns grow about further tariff impositions on Southeast Asian nations like Vietnam, Malaysia, and Indonesia. This uncertainty breeds fear among manufacturers, complicating strategic planning.
Steve Greenspan: “This is part of the uncertainty that is going on right now... making people really scared and panicked.”
Timestamp: 15:31 - 16:01
The effectiveness of tariffs in achieving their intended goals—such as bringing manufacturing back to the U.S.—is brought into question. Many manufacturers argue that the U.S. lacks the capacity and competitive labor needed to replace Chinese production effectively.
Steve Greenspan: “A lot of the manufacturers I talk to in the US Say we can't really start building this in the US... There isn't the capacity here to build everything that American consumers want to buy.”
Timestamp: 16:20 - 16:44
Looking ahead, Steve anticipates potential negotiations between the U.S. and China but remains uncertain about the outcomes. He suggests that significant reevaluations may occur if the economic strain on American consumers intensifies.
Steve Greenspan: “What I'm looking for next is if there will be some more negotiation between the US And China and what kind of deal that might look like... when things really start to get painful for the American consumer, that there will be a reevaluation.”
Timestamp: 16:47 - 17:39
7. Conclusion
The episode underscores the profound impact of the U.S.-China trade war on global manufacturing dynamics. As companies like Honey Can Do navigate the turbulent waters of increased tariffs and shifting production locales, the broader implications for China's economy and global trade relationships become increasingly evident. The uncertainty surrounding future policies continues to challenge businesses, highlighting the intricate interplay between government actions and international commerce.
Additional Reporting: Clarence Lung and Roshan Fernandez
Production Credits: The Journal is a co-production of Spotify and The Wall Street Journal.