Trump's Trade War Hurting U.S. and European Companies in China
(Bloomberg) -- The trade dispute between the U.S. and China is hurting U.S. and European companies operating in China, with firms planning to cut investment as manufacturing costs increase and demand for products drop.
American companies warned that an escalation could cause even greater pain, according to an Aug. 29 to Sept. 5 survey of more than 430 American companies conducted by AmCham China and AmCham Shanghai. The polling found that more than 60 percent of the firms were hurt by the initial round of tariffs between the two governments, with 74 percent foreseeing harm from future U.S. tariffs and 68 percent from potential Chinese retaliatory duties.
The U.S. and China have engaged in a series of tit-for-tat tariffs since July, when President Donald Trump started slapping duties on $50 billion of Chinese imports. Trump raised the stakes last week, announcing he’s willing to impose tariffs on an additional $267 billion in Chinese goods, on top of a proposed $200 billion his administration is already considering. China has said it would be forced to retaliate to all of the U.S. measures.
With the new round of trade barriers, “the U.S. administration runs the risk of a downward spiral of attack and counter attack, benefiting no one,” said William Zarit, chairman of AmCham China.
Trump administration officials counter that the short-term pain of its trade dispute will become worth it when China agrees to buy more American-made products and better shield U.S. companies from intellectual-property theft. They say previous strategies of prolonged negotiations with Beijing failed to protect American companies and workers.
But the AmCham survey underscores the damage that trade barriers could impose on economies in both countries by denting production, boosting prices and slowing investment. The U.S. Federal Reserve in a monthly survey published Wednesday also said American companies are growing increasingly concerned about the fallout from a trade war.
Respondents of the AmCham survey were primarily in manufacturing, with automotive, machinery and chemical producers expected to take the biggest hit from future tariffs. Profit losses, higher manufacturing costs and decreased product demand were some of the biggest downsides of the tariffs, according to the report. Nearly one-third of respondents are considering delaying or canceling investments, especially those in the agribusiness industry.
“This survey affirms our concerns: tariffs are already negatively impacting U.S. companies and the imposition of a proposed $200 billion tranche will bring a lot more pain,” said Eric Zheng, chairman of AmCham Shanghai.
Seventeen percent of respondents to a separate survey of European companies reported they were delaying investment and expansion, while 5 percent were moving production out of the U.S. and almost 7 percent were shifting output from China.
"While only a small percentage of European firms in China have taken drastic measures, like relocating or changing suppliers, these represent worrisome trends to what is currently only a portion of the possible additional tariffs being considered by the U.S. and the subsequent potential responses from the Chinese," according to the report.
Almost 54 percent of the 193 companies surveyed in the report saw the U.S. tariffs as negative for business, while almost 43 percent said the Chinese retaliation was. The survey was conducted by the European Union Chamber of Commerce in China through Sept. 3.
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