European firms mull relocating mainland production to Southeast Asia amid escalating US-China trade war

The European Union Chamber of Commerce in China says the issue can be easily resolved if Beijing opens up further, takes away market access barriers and conducts more economic reforms

PUBLISHED : Tuesday, 18 September, 2018, 11:03pm
UPDATED : Tuesday, 18 September, 2018, 11:32pm

European companies operating in China are extremely worried about getting caught in the US-China trade war crossfire and some are considering relocating to Southeast Asia as punitive tariffs slapped by the world’s two largest economies take a toll on multinational firms, according to the European Union Chamber of Commerce in China.

On Tuesday US President Donald Trump announced an additional 5-10 per cent levy on US$200 billion worth of Chinese imports from next Monday, the latest round of punitive trade tariffs on the world’s second-largest economy. China’s Ministry of Commerce said it would fight back by taking “synchronised counter measures” against the tariffs.

A survey by the business lobby group found that nearly 54 per cent of nearly 200 respondents feel the US tariffs will cause significant disruptions to the global supply chain and some 7 per cent have either moved or are planning to move their production out of the mainland. And that percentage could rise as some companies were still assessing the impact from the trade war before they make their decision.

The survey also showed that 5.2 per cent European companies have either moved or are moving US-based production facilities out of the market.

“We believe that if China would open up more, take away the market access barriers, conduct more economic reforms without creating stronger state-owned enterprises, all of those [trade war and trade tensions] can be avoided,” said Carlo Diego D’Andrea, vice-president of the EU chamber.

Multinational companies plan to move production capacity to Southeast Asian markets such as Vietnam and Philippines to dodge the additional tariffs levied on the key parts which are imported from the US and used for assembling and processing in China.

Half of US firms in China foresee acute pain from new tariffs as trade war escalates

The survey also anticipated that the trade war will result in slower economic growth, millions of job losses, less trade, higher production costs and weaker demand in China.

“Both [sides] are prone to losing companies as a result,” the EU chamber said.

The EU chamber said the cause for the trade war and the tensions in the global economic system was China’s reform and opening failing to keep pace with its rapidly maturing economy.

“European companies have for a long time been stifled by the efforts of China’s reform deficit, and now they are taking collateral damage from the US-China trade war,” said Mats Harborn, president of the EU chamber in China.

Trump spares Apple Watch, AirPods from fresh US$200 billion tariffs

Last week, the American Chamber of Commerce in Beijing and Shanghai found in a survey that three-quarters of US companies operating in China would be negatively impacted if the tariffs on US$200 billion worth of Chinese goods were implemented.

More than 47 per cent of respondents from a survey of 430 US companies said they were expecting a “strong negative impact” from the tariffs.