(September 2)As Trump's trade war with China heats up, Trump is not only adding more tariffs to Chinese goods but encouraging US companies to move out of China.
Trump's demand
As a recent article reported: "President Donald Trump on Friday said he was ordering U.S. companies to “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”"
Trump claimed that many companies plan to leave China. In response to a question he said: "Thirteen per cent of the companies will be leaving China in the fairly near future. And I'm not surprised to hear that. I think it's going to be much higher. Because they cannot compete with the tariffs. They can't compete."
Vast majority of US companies intend to stay in China
A new survey of US China Business Council members found that 87 percent of respondents have not moved and do not plan on moving operations out of China. This is down from 90 percent a year ago. Some may indeed leave but the vast majority are planning to stay. Only 3 percent of those responding said that their Chinese operations were not profitable. This is unchanged from the year before.
The survey reached about 100 members of the Council and was conducted over three weeks in June. However, relations between China and the US government has since grown even worse so perhaps there will be more intending to leave.
Trump may be most concerned with US companies exporting to the US from China
Craig Allen, the Council president said that he did not thing that Trump actually wanted US companies that serve Chinese domestic markets to leave the country. Trump appears to be most negative against Chinese exports. Allen said: “We do not believe that he wishes to encourage other American companies that have successful operations in China to leave. Our members are in China for the long term, none of them are anticipating orders to leave.” Less than a quarter of Council members invested in China to export to the US or regionally.
Effects of US China trade war on US businesses in China
83 percent of the Council members said they did not curtail investments over the past year in spite of the trade war but a year ago the number was considerably higher at 92 percent.
There were other negative effects: “Nearly half of respondents report lost sales and ceding market share to foreign competitors,” the survey stated. The primary contributor to lost sales is the implementation of both U.S. and Chinese retaliatory tariffs, as evidenced by lost price competitiveness, shifts in supply chains, and uncertainty of continued supply.”
Allen said that loss of business in the Chinese market due to the trade war could have long-term negative impacts for US companies. Allen noted that it was easy to lose market share but quite difficult to ever get it back.
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