Export Slowdown May Cause Higher Prices, Shortages, Delays

Tuesday, 11 January 2011 07:14

Written by Julius

America's huge and tension-filled trade deficit with China could be eased and limited if inflation slows down the latter's mighty exporting machine. Trade deficit, or the negative balance of a trade in which the amount of a country's export is less than its imports, was the one of the underlying tensions during US President Barack Obama and Chinese President Hu Jintao's recent talks in the Washington.

Because of inflation, Western multinational companies are now cutting back on importation of products from the big manufacturer China, and consumers are balking at the higher prices of merchandise. Some of these companies have even canceled their shipping of raw materials across the Pacific.

There were markups of 20 to 50 percent on products across the range of industries, for example in clothing and shoes, that sent these Western multinational companies scrambling for alternative suppliers. Though there are available alternative suppliers, like Vietnam, India and other Southeast Asian countries, none could match China's manufacturing power and refuge from high global commodity prices.

The American shoppers would reel from limitations in trade deficit. In effect, the slowdown in export would expect higher prices or even temporary shortages of products in the coming months, according to manufacturers and distributors. They also say that delays on purchases are also expected, because most probably retailers would haggle over commodity prices.

Such delays and shortages could be prevented if Western buyers would renew contracts at a much higher cost. However, this implies that American shoppers should first accept and purchase the products, even at higher prices.