• U.S. businesses in China view the trade war between the two countries as a long-term situation, with nearly 27% of companies believing it will last indefinitely (up from almost 17% in 2019) and nearly 23% believing it will last another three to five years (up from about 13% in 2019), according to a survey published Wednesday by the American Chamber of Commerce in Shanghai and PwC.
• Companies’ concerns about tariffs resulting from the trade war have fallen from 2019. Nearly 23% of respondents said they were planning to delay investment in China, compared to 32% last year, the survey found.
• The survey, which took place between June 16 and July 16 and included responses from 346 companies, included 200 respondents that own or outsource manufacturing in China. Of these respondents, almost 71% had no plans to move out of China, 14% are moving to other non-U.S. locations, and about 4% are moving some production back to the U.S.
2020 Started on an optimistic note for the trade relationship between China and the U.S., with a phase 1 trade deal coming a few weeks after the start of the year. The deal kept many of the tariffs in place, but had the U.S. increase its exports to China by $200 billion over a 2017 baseline.
“But now a wider chill in US-China relations obscures the outlook and threatens to overturn the goodwill and progress achieved by the Phase One agreement,” the AmCham wrote in a report accompanying the survey. “These conflicting forces mean that the data in this year’s report is mixed.”
Since the survey took place, the trade relationship between China and the U.S. has continued to sour. Last month, the Trump administration suspended or ended three trade agreements with Hong Kong. This came after President Donald Trump signed an executive order in July ending Hong Kong’s special status with the U.S., saying the region “is no longer sufficiently autonomous” after the Chinese government’s imposition of national security legislation on Hong Kong.
Hong Kong’s special status allowed for trade to take place between the countries with few tariffs and visas. Removing the status would place Hong Kong under the same rules as China, which would hurt U.S. companies in Hong Kong, William Reinsch, the Scholl Chair in International Business at the Center for Strategic and International Studies, wrote in June before the status was revoked.
Some trade observers have also voiced skepticism that China will live up to its end of the phase 1 trade deal, given the amount it would need to import from the U.S. this year to comply.
“What we’ve seen so far is a requirement to buy $36 billion worth of goods, and we may edge our way toward $10 billion,” Port of Los Angeles Executive Director Gene Seroka said during a press conference in August, referring to the dollar amount of agricultural goods China agreed to buy under the deal. “We’ve got so much more to do here.”
U.S. and Chinese officials reaffirmed their commitment to the deal in a call late last month, according to Reuters.
The pandemic has collided with the trade war to result in some companies voicing interest in reshoring or nearshoring manufacturing. But this latest survey from AmCham and PwC suggests those companies are in the minority.
AUTHOR: Matt Leonard