(Yicai Global) Jan. 24 -- Multinational electronics maker Foxconn Technology Group [HKG:2038] is considering shifting production lines to the US because of potential new trade tariffs.
The Taiwan-based company is mulling a joint investment with Apple Inc. [NASDAQ:AAPL] for a display facility in the US, the Nikkei Asian Review yesterday cited Foxconn Chairman Terry Guo as saying.
Donald Trump said before the US presidential election that he would impose a 45 percent tariff on imports of Chinese-made products if he won. The only certainty is that trade protectionism will increase in the US and China will attempt to counter it. Though many believe a trade war is unlikely, the possibility of frictions between Beijing and Washington escalating is increasing, given the number of unexpected global events last year.
The Nikkei said the investment will exceed USD7 billion and create 30,000 to 50,000 jobs once in operation. The continued increase in demand for larger display panels makes local production a better solution than shipping from China to the US market. Foxconn is also planning a new molding facility in the US, possibly sited in Pennsylvania.
"Apple is willing to invest in the facility with us because they need the panels as well," Guo said.
Smart Technologies Inc., a Canada-based interactive display firm owned by Foxconn, may also head south after President Trump indicated intent to renegotiate the North American Free Trade Agreement. Uncertainty has also prompted Apple to consider moving its manufacturing out of China, where over 350 of its suppliers are based.
Leading investment banks are already studying worst-case scenarios for the world if a trade war does break out. "If the US imposes a 45 percent tariff on China, the MSCI China Index could slip 30 percent from its current level, while a 5 percent increase in tariffs is unlikely to have much impact," said Jonathan Garner, a Hong Kong-based strategist at Morgan Stanley.