U.S.-China trade war hurting American companies in China as tariffs cut into demand
May 28, 2019 Category Foreign investment, Weekly
Three-quarters of U.S. companies operating in China said the escalating trade war between Washington and Beijing was hurting their business, according to a new survey by the American Chamber of Commerce in China. More than half of respondents said that higher tariffs imposed by both countries were cutting into demand for their products and 42% said they were experiencing higher manufacturing costs. Of those surveyed, 38% said they were seeing higher sales prices for their products. “The negative impact of tariffs is clear and hurting the competitiveness of American companies in China,” AmCham China and AmCham Shanghai said in a joint statement. The survey interviewed 239 member companies between May 16 and 20, with nearly 62% of the respondents coming from manufacturing-related industries.
China and the U.S. appeared close to reaching a trade agreement as recently as late April, but the Trump administration abruptly reversed course earlier this month and increased tariffs from 10% to 25% on thousands of Chinese goods. As tariffs have increased, a third of companies said they were delaying or cancelling investment decisions, according to AmCham. Of those surveyed, 35% said they were adopting an “in China, for China” strategy, localizing manufacturing and sourcing for the Chinese market, rather than exports. “Such a strategy constitutes a rational choice for many companies to insulate themselves from the effects of tariffs while maintaining their ability to pursue domestic market opportunities,” the Chambers said.
More than half of respondents said they had not experienced an increase in retaliatory measures other than tariffs by the Chinese government, but one in five said they had experienced increased inspections and slower customs clearance of their products. The tariffs have not been encouraging companies to move jobs back to the U.S., according to AmCham. Of the surveyed companies, 41% said they were considering relocating or had relocated manufacturing facilities outside China, but only 6% were considering moving back to the U.S. Southeast Asia was the top destination, followed by Mexico, the South China Morning Post reports.
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