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  September 26th, 2018 | Written by

The negative impact of tariffs on US companies in China

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  • Survey: Over 60 percent of respondents of US companies in China said initial tariffs negatively impacted them.
  • The negative impact of tariffs is reflected in loss of profits, higher production costs, and decreased product demand.
  • Many companies are adjusting their supply chains by sourcing components and/or assembly outside of the US or China.

With trade tensions between the United States and China escalating, AmCham China and AmCham Shanghai conducted a survey of member companies to measure the impact of tariffs imposed by the US and Chinese governments.

The survey was conducted between August 29 and September 5, 2018. Over 430 companies responded to the survey, 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.

The survey found that the negative impact of tariffs is clear and far-reaching, with rising costs being a top concern. Over 60 percent of respondents said the initial $50-billion of tariffs from both the US and China negatively impacted their companies. Nearly three-quarters expected to be negatively affected by the second round of US tariffs and over two-thirds say the same for Chinese tariffs.

The practical impact of the combined tariffs is reflected in loss of profits—reported by 50.8 percent of respondents—higher production costs (47.1 percent), and decreased demand for products (41.8 percent). Fewer than 12 percent of respondents have laid off employees, although that number should rise with the second round of tariffs.

Over half of respondents note an increase in non-tariff barriers. China has threatened to use qualitative measures in addition to tariffs in responding to US actions, since it can’t match US tariffs dollar for dollar. Over 50 percent reported suffering the consequences of these measures, mainly through increased inspections (27.1 percent) and slower customs clearance (23.1 percent).

Some companies are reassessing their investment plans. Many companies are seeking to adjusting their supply chains by sourcing components and/or assembly outside of the US (30.9 percent) or China (30.2 percent). Nearly one-third said they are considering delaying or canceling investment decisions. But a majority of nearly two-thirds have not relocated and are not considering relocating manufacturing facilities out of China. Among those who are, the top destinations are Southeast Asia

and the Indian subcontinent. Only six percent say they are considering relocation back to the US.