Key Tronic will open Vietnam factory as hedge in U.S.-Chinese trade war

A Spokane Valley company will open a factory in Vietnam this year as a hedge against the potential for a protracted U.S. trade dispute with China.

Key Tronic Corp. is a contract manufacturer, producing electronics for other companies at facilities in China, the U.S. and Mexico. As a result of the Trump Administration’s trade policies, more of the company’s electronic components made in China and eventually sold in the U.S. are subject to tariffs, said Brett Larsen, Key Tronic’s chief financial officer.

The new factory will allow Key Tronic to shift some of its production to Vietnam from China, reducing manufacturing costs, said Craig Gates, Key Tronic’s president and chief executive.

The Vietnam factory provides “an additional hedge against uncertainty in a lingering or future trade war with China,” Gates said in a news release.

Vietnam is considered a winner in the U.S.-Chinese trade dispute, as companies look for ways to avoid tariffs on Asian goods headed to U.S. markets. Because tariffs get passed onto consumers, raising the cost of products, makers of common American goods are moving production outside of China where the tariffs don’t apply, Politico reported in late November.

President Donald Trump announced 10 percent tariffs on $200 billion worth of Chinese imports in September and threatened to raise duties to 25 percent by the year’s end. In early December, he and Chinese President Xi Jinping agreed to continue talks for 90 days, with the U.S. indicating it would keep the tariffs at 10 percent for the time being.

However, if the two countries don’t reach an agreement on remaining trade issues within the 90 days, the U.S.’s 10 percent tariff on Chinese goods will increase to 25 percent.

Key Tronic anticpates opening the Vietnam factory by July. The company has signed a letter of intent to lease a 86,000-square-foot facility in Da Nang, a port city on the South China Sea. The building is in an industrial park in a government-sponsored export zone.

Recruitment is underway for a general manager. ,Key Tronic expects to hire about 150 to 200 people in Vietnam.

Key Tronic employs about 5,500 people worldwide, including 250 at its Spokane Valley headquarters. The corporate headquarters house the company’s professional and technical staff, such as engineers and finance, program and supply chain managers. Key Tronic also has a small manufacturing operation in Spokane Valley.

Along with affecting Key Tronic’s Chinese operations, the tariffs have resulted in some new work for the company’s U.S. manufacturing facilities, Larsen said. In addition to Spokane Valley, the company has factories in Minnesota, Mississippi and Arkansas.