US firms in China hurting from high cost, low demand amid trade war

SINGAPORE (ICIS)–US firms with operations in China are hurting from lower demand for products, higher manufacturing costs and higher sales prices of products, as direct consequences of the trade war between the two economic giants.

(Source: ROMAN PILIPEY/EPA-EFE/REX/Shutterstock)

“The negative impact of tariffs is clear and hurting the competitiveness of American companies in China,” the American Chamber of Commerce (AmCham) in China said in a statement issued on Wednesday.

To cope with the adverse impact of the tariffs, these companies have been “increasingly adopting an ‘In China, for China’, or delaying and canceling investment decisions”, according to the results of its latest survey.

The survey, which received 250 responses, was conducted from 16-20 May 2019, after the US raised the tariffs on $200bn worth of Chinese goods to 25% from 10%, and China announced its plan to retaliate with its own tariff hike effective June.

“The vast majority (74.9%) of respondents said the increases in U.S. and Chinese tariffs are having a negative impact on their businesses. The impact was higher for manufacturers at 81.5% for U.S. tariffs and 85.2% for Chinese tariffs,” the group said.

The US-China trade war escalated on its 10th month as high-level negotiations between the two countries have soured in recent weeks amid thorny issues in the proposed deal.

A total of $360bn worth of goods between the two countries have been slapped with high tariffs since the trade war started in July 2018.

“While over half of respondents (53.1%) have not seen any increase in non-tariff retaliatory measures by the Chinese government, roughly one in five have experienced increased inspections (20.1%) and slower customs clearance (19.7%),” AmCham said.

“Members also experienced slower approval for licenses or other applications (14.2%) and other complications from increased bureaucratic oversight or regulatory scrutiny (14.2%),” it said.

About 40.7% of the total respondents are considering relocation or have relocated manufacturing facilities outside China, with southeast Asia and Mexico as top destinations.

“Fewer than 6% of members said they have or are considering relocation of manufacturing to the US,” AmCham said.

A majority of those surveyed (53.3%) “favor negotiations continuing towards a deal that addresses structural issues allowing them to operate on a more level playing field”, while 42.7% prefer a return to status quo.

Meanwhile, US footwear companies, in a letter addressed to US President Donald Trump dated 20 May, sought the removal of their products from the tariff list, citing that additional tariffs of 25% “would be catastrophic for our consumers, our companies, and the American economy as a whole”.

“Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end,” they stated in a letter signed by 173 footwear companies, brands and retailers.

The group said that US consumers pay for tariffs on imported products.

“As an industry that faces a $3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer,” they stated.

Focus article by Pearl Bantillo

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