BUSINESS US companies report 'clear negative impact of tariffs'

BUSINESS

US companies report 'clear negative impact of tariffs'

Global Times

22:20, May 22, 2019

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A worker sorts candles to be exported to the US in a factory in Shenyang, Northeast China's Liaoning Province, on April 20. (Photo: IC)

US companies in China are feeling the sting of the ongoing trade war and are generally concerned about the potential deterioration of the relationship between China and the US, according to a survey conducted by the American Chamber of Commerce in China (AmCham China).

Experts noted that the harm could be long-lasting and difficult to avoid. 

According to the survey, which covered about 250 US companies in China in industries ranging from manufacturing and services to retail and distribution, 74.9 percent are experiencing "clear negative impacts" of the tariffs, especially for US manufacturers. 

Many complained that the trade war is hurting their competitiveness in China, where the demand for products is shrinking but manufacturing costs are rising. 

The report also shows that in response to the impact of the tariffs, about 35 percent of the US companies in the survey are considering localizing their manufacturing or sourcing within China in an attempt to insulate themselves from tariffs.

The localization of manufacturing is shown by the "In China, for China" strategy adopted by an increasing number of companies. 

Wu Xiaolu, marketing director for Asia at JLG Industrie, a US company specializing in access equipment manufacturing, told the Global Times in an earlier interview that the company is concerned about the effects of the tariffs on its business, especially the increased cost of certain equipment parts that need to be imported from the US. 

The company is making plans to relocate the manufacturing of more equipment models to China to avert the negative effects of the tariffs. 

"Fortunately, only a limited number of our equipment parts are from the US, but we are still concerned about the trade war's effects in the future," Wu said. "We are considering that for some models that were perhaps not that popular in the past, maybe we should relocate the manufacturing locally or cooperate with local factories to ensure that we retain our competitiveness in price in the Chinese market." 

Apart from the relocation of manufacturing, some US companies are also experiencing other difficulties including slower customs clearance and license approvals. Companies are also worried that the relationship between the US and China would deteriorate, making it more costly to operate, the report said. 

Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics, told the Global Times that although higher tariffs are affecting US companies negatively, there is very little the companies can do.

"Even the localization of manufacturing doesn't solve all the problems," Sang said. "If the Chinese factory is also making products for the US market, companies will have to relocate their manufacturing elsewhere, which can be expensive and time-consuming."

Sang said that the tariffs can also affect Chinese companies, especially large ones that have internationalized their production chains involving the US, notably in electronic devices. 

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