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US companies reconsider China presence because of trade war, says survey

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Three-quarters of US firms have seen orders dry up as a result of the trade war, a survey found on Wednesday. AFP

US companies reconsider China presence because of trade war, says survey

Most US businesses in China are hurting from the tariffs war between the two countries, forcing some companies to relocate abroad or refocus their business, a survey showed on Wednesday.

The recent poll by the American Chamber of Commerce in China and its sister organisation in Shanghai paints a gloomy picture of the business environment for US companies.

Three-quarters of the 250 respondents said increases in US and Chinese tariffs are having a “negative impact” on their business as orders were drying up owing to rising manufacturing costs and prices.

Nearly half said they have experienced non-tariff retaliatory measures in China since last year, with one in five reporting increased inspections and a similar amount enduring slower customs clearance. And 14 per cent complained of other complications from increased bureaucratic oversight and regulatory scrutiny.

The US and China have so far exchanged tariffs on more than $360 billion in two-way trade.

The poll was conducted from May 16 to May 20, days after the US more than doubled duties on $200 billion in Chinese goods and Beijing retaliated with higher duties on $60 billion in US products.

The poll showed that 35 per cent of companies would adopt an “in China for China” strategy – sourcing within China and targeting the domestic market – as a result of tariffs.

But more than 40 per cent said they were “considering or have relocated” production facilities outside China, with Mexico and Southeast Asia the preferred alternatives for manufacturing.

Fewer than six per cent said they have moved or are considering moving their factories to the US, undercutting President Donald Trump’s hopes of seeing US companies move production back home.

‘Structural issues’

Trump launched the trade war last year to extract profound economic reforms from Beijing, accusing China of seeking to forge global industrial dominance through massive state intervention in markets and the theft of US technology.

Despite the pain, more than half of respondents said they favour protracted trade talks to continue in order to address “structural issues allowing them to operate on a more level playing field”.

Others wanted a quick deal and a return to the “pre-tariff predictability and stability” that existed before the world’s two biggest economies locked horns.

After talks ended in Washington this month, China’s top trade negotiator Liu He said another round would take place in Beijing, but neither side has announced a date.

Trump has left open the door for reconciliation, saying he expected a “fruitful” meeting next month with his Chinese counterpart Xi Jinping at a Group of 20 summit in Japan.

Chinese foreign ministry spokesman Lu Kang said at a regular press briefing that he had not seen the survey.

But, Lu added: “Even when the US threatens to impose tariffs on China, the enthusiasm for foreign investment in China has not diminished and continues to increase.”

Lu said China has “no intention” to take retaliatory action against US companies because of the trade war.

“We are still committed to providing a fair, reasonable, transparent, non-discriminatory and predictable business environment for enterprises investing in China,” he said.

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