Amid escalating U.S.-China bilateral trade tensions, AmCham China and AmCham Shanghai have conducted a joint survey of member companies to measure the impact of trade war tariffs imposed by both the U.S. and Chinese governments.
While it is obvious that the trade war is having a negative financial impact on U.S. companies based in China, the survey’s more revealing findings are to be found in the implications behind survey responses.
Numbers, however, as they say, don’t lie.
Over 60 percent of respondents say the initial U.S.$50 billion of tariffs from both the U.S. and China negatively impact their companies. The proportion of companies expecting to be negatively affected by the second round of tariffs jumps to 74.3 percent for the U.S. tariffs (U.S.$200bn) and 67.6 percent for Chinese tariffs (U.S.$60bn). Over twice as many companies anticipate a “strong negative impact” if the second round of tariffs are implemented.
The practical impact of combined tariffs is reflected in loss of profit (50.8 percent), higher production costs (47.1 percent), and decreased demand for products (41.8 percent). Only 11.8 percent of respondents have reduced employees, though the second tranche of tariffs will most likely raise this percentage.
Now for the interesting trade war stuff.
Over half of respondents note increase in non-tariff barriers; China has for some time warned that it will use qualitative measures in addition to tariffs in responding to U.S actions, as it cannot match U.S. tariffs dollar for dollar.
U.S. companies are reporting that is exactly what has started happening.
A slim majority (52.1 percent) reported suffering the consequences of such measures, mainly through increased inspections (27.1 percent), slower customs clearance (23.1 percent) and other complications from increased bureaucratic oversight or regulatory scrutiny (19.2 percent).
Elsewhere, supply chains have also significantly impacted, with some companies reassessing investment plans.
Adjusting supply chains is a common response to the tariffs, with many companies seeking to source components and/or assembly outside of either the U.S. (30.9 percent) or China (30.2 percent). Nearly one-third (31.1 percent) say they are considering delaying or canceling investment decisions.
Every cloud has a silver lining. The majority of survey respondents, nearly two-thirds (64.6 percent), have not relocated and are not considering relocating manufacturing facilities out of China, on account of the trade war. Among those who are, the top destinations are Southeast Asia and the Indian Subcontinent. Only 6 percent say they are considering relocation back to the U.S.
The AmCham survey was conducted between 29 August and 5 September, 2018. Over 430 companies responded, of which 60.6 percent are in manufacturing-related industries, 25.8 percent in services, 5.5 percent in retail and distribution, and 8.1 percent in other industries.
