AmCham survey: 75% of U.S. firms in China see drag from higher tariffs, 40% consider moving factories out

23, May. 2019

TOKYO, NNA - A vast majority of U.S. firms in China is increasingly concerned about the growing impact of an escalating trade dispute between Washington and Beijing, with some considering phasing out production in China.

That is the conclusion of a survey conducted between May 16 and May 20 by the American Chamber of Commerce in China and AmCham Shanghai in which 74.9 percent of respondents see higher U.S. and Chinese tariffs adversely affecting their business.

AmCham China has more than 3,300 individual members from 900 companies operating across China.

The survey tallied nearly 250 responses. It found that 52.1 percent believe the higher tariffs will dampen demand for their products, while 42.4 percent said the trade row would lead to higher manufacturing costs, and 38.2 percent said it would result in higher prices for their products.

It also found that 40.7 percent of respondents are considering or have already relocated manufacturing facilities outside China, with Southeast Asia (24.7 percent) and Mexico (10.5 percent) the top destinations. Less than 6 percent said they are considering moving, or have moved manufacturing to the U.S.

The survey showed that 35.3 percent of respondents are increasingly adopting an “In China, for China” strategy, while 33.2 percent are delaying and canceling investment decisions in China.

“In China for China” aims to localize manufacturing and sourcing within China to mainly serve the domestic market.

While more than half of respondents (53.1 percent) have not seen any increase in non-tariff retaliatory measures by the Chinese government, 20.1 percent reported that they have experienced increased inspections and 19.7 percent saw slower customs clearance.

According to the survey, 52.7 percent are most concerned about deterioration of the bilateral relationship if no agreement is reached within the next two months.

The U.S. Commerce Department last week placed Huawei and 68 affiliates in China and other countries on its Bureau of Industry and Security Entity List, effectively blocking the Chinese telecom giant from accessing American technologies.

A sale or transfer of American technology to a company on the list requires a license issued by the U.S. government, and there is a chance that license would be denied if the sale is deemed to hurt U.S. national security or foreign policy interests.

President Donald Trump also last week signed an executive order barring American companies from installing foreign-made telecoms equipment deemed a national security threat, an apparent bid to ban Huawei from U.S. networks.

The simmering trade dispute between the world’s two largest economies about opening markets has caused a slowdown in economic growth, globally.