PRESSURED by a labor crunch and rising wages in China, Shu Ke’an, whose company’supplies bulletproof vests, rifle bags and other tactical gear to the United States, first considered shifting some production to Southeast Asia a few years ago, but nothing came of it.

When trade tensions flared into a tariff war last year, however, it was the final straw.

A day after U.S. President Donald Trump imposed additional tariffs on US$200 billion in Chinese goods in September, Shu, 49, decided to start making vests for his U.S. clients in Myanmar instead.

Since then, the Trump administration has further hiked tariffs on Chinese imports, raising the U.S. taxes on Shu’s Guangzhou-made bulletproof vests to 42.6 percent.

With more than half of his company’s income reliant on orders from the United States, Shu was happy with his Myanmar decision.

“The trade war was actually a blessing in disguise,” he said.

In recent years, some Chinese manufacturers had already started to relocate some of their capacity to countries such as Vietnam and Cambodia, due to high operating costs at home. The trade war is now pushing more to follow suit, especially makers of low-tech and low-value goods.

A few Chinese exporters have also tried to dodge the trade war bullet by quietly transhipping via third countries.

Nine months on, Shu’s firm, Yakeda Tactical Gear Co., is relying on his new Myanmar factory, which started operations in December, to produce new orders for its U.S. clients.

The 220 workers at his original Guangzhou plant, in China’s Pearl River Delta manufacturing powerhouse, now mostly supply clients in the Middle East, Africa and Europe.

In Yangon, meanwhile, Shu’s Myanmar factory turns raw materials imported from China into backpacks, kit bags and pouches for rifles and pistols — all labeled “Made in Myanmar” — almost all of which are exported to the United States.

“Our factory is receiving many orders. The products are being exported to the U.S. and Europe. So, I believe our future will be improved from working in this factory,” said Marlar Cho, 36, a supervisor at the factory.

The factory manager, 40-year-old Jiang Aoxiong, said they were constantly rushing to keep up with orders, despite its 600-strong workforce.

Though international criticism of Myanmar’s handling of the Rohingya crisis has crimped Western investment, the Southeast Asian nation has become the choice destination for some Chinese firms, drawn to its cheap and abundant labor.

The former British colony, located on China’s southwestern border, exports some 5,000 products to the United States duty-free under a U.S. trade program for developing nations.

In the 12 months through April, approved Chinese projects increased by US$585 million, the latest data from Myanmar’s Directorate of Investment and Company Administration show.

The infusion of Chinese capital has helped fuel expansion in Myanmar’s industrial sector.

In May, firms saw the fastest rise in workforce numbers since 2015, while production hit a 13-month high, the latest Nikkei Myanmar Manufacturing Purchasing Managers’ Index survey showed.

ACMEX Group, a tire maker based in eastern China’s Shandong Province, already had some experience with offshoring when the trade war began.

About two years ago, it started manufacturing some tires in Vietnam, Thailand and Malaysia to take advantage of lower labor and raw material costs and avoid U.S. anti-dumping duties.

With fresh tariffs in the trade war, the firm plans to boost the proportion of tires made abroad to 50 percent from 20 percent, and build its own factories instead of outsourcing to existing factories, chairman Guan Zheng said.

“The time is ripe now,” he said, adding that supply chain infrastructure had improved.

(SD-Agencies)