From May 16-20, 2019, AmCham China and AmCham Shanghai conducted a joint survey of our member companies to assess the impact of the increase in U.S. and Chinese tariffs on companies operating in China. The survey received nearly 250 responses, with companies represented as follows: 61.6% manufacturing-related, 25.5% services, 3.8% retail and distribution, and 9.6% from other industries. A similar survey was conducted in September 2018. The key findings from the survey are:
The negative impact of tariffs is clear and hurting the competitiveness of American companies in China. The vast majority (74.9%) of respondents said the increases in U.S. and Chinese tariffs are having a negative impact on their businesses. The impact was higher for manufacturers at 81.5% for U.S. tariffs and 85.2% for Chinese tariffs. The impact of the tariffs is felt through lower demand for products (52.1%), higher manufacturing costs (42.4%), and higher sales prices for products (38.2%).
To cope with the impact of the tariffs, companies are increasingly adopting an “In China, for China” strategy (35.3%), or delaying and canceling investment decisions (33.2%). In China for China is a strategy to localize manufacturing and sourcing within China to mainly serve the China market. Such strategy constitutes a rational choice for many companies to insulate themselves from the effects of tariffs while maintaining their ability to pursue domestic market opportunities.
While over half of respondents (53.1%) have not seen any increase in non-tariff retaliatory measures by the Chinese government, roughly one in five have experienced increased inspections (20.1%) and slower customs clearance (19.7%). Members also experienced slower approval for licenses or other applications (14.2%) and other complications from increased bureaucratic oversight or regulatory scrutiny (14.2%).
Approximately 39.7% of respondents are considering or have relocated manufacturing facilities outside China. For those that are moving manufacturing out of China, Southeast Asia (24.7%) and Mexico (10.5%) are the top destinations. Fewer than 6% of members said they have or are considering relocation of manufacturing to the U.S.
- If no agreement to resolve the trade frictions is reached within the next two months, members are most concerned about a deterioration of the bilateral relationship (52.7%). As a reflection of this sentiment, 42.7% of members supported a return to the status quo, showing that members want a deal and a return to the pre-tariff predictability and stability of the U.S.-China trade relationship. At the same time, this would suggest that 53.3% of members favor negotiations continuing towards a deal that addresses structural issues allowing them to operate on a more level playing field. Additionally, members are also concerned about an increase in operating costs (45.6%) and being forced to find alternative sources for items currently produced in either the U.S. (22.2%) or China (22.2%).
Mark Dreyer, AmCham China, Email: firstname.lastname@example.org, 010 8519 0834
Ian Driscoll, AmCham Shanghai, Email: email@example.com, 021 6279 7119 ext. 5655