European Firms in China Shift Supply Chains to Combat Trade War

(Bloomberg) --

European companies operating in China are increasingly choosing to reshuffle supply chains rather than shoulder the pain from higher tariffs.

According to a survey by the European Union Chamber of Commerce in China, recent moves by its members have “changed drastically” from the start of the year. Back then, businesses using U.S.-sourced inputs were more likely to pass on higher costs, but as tariffs rise further and the trade war drags on, companies are instead trying to circumvent direct U.S.-China trade.

“European companies have clearly adapted to survive in an extended trade war rather than hunker down in the hope that it will run its course,” the business association said in its report.

About one in four respondents import supplies or goods from the U.S. that are affected by the tariffs, and 19% of total respondents say prices have gone up.

The survey shows more European companies are reacting by leveraging their own global operations or shifting supply chains across other markets. A few firms are increasing their investment into China, using onshoring to avoid tariffs altogether. The report’s “most concerning finding” is that 15% of respondents have delayed investment or expansion decisions.

To contact Bloomberg News staff for this story: Carolynn Look in Beijing at clook4@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Sharon Chen, Jiyeun Lee

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With assistance from Bloomberg