US firms in China say Donald Trump’s tariffs will hurt them, not make them move home

American Chamber of Commerce reports ‘strong negative impact’ on its member companies and says only 6 per cent would consider moving to US

PUBLISHED : Tuesday, 18 September, 2018, 2:53pm
UPDATED : Tuesday, 18 September, 2018, 10:39pm

US President Donald Trump’s decision to impose tariffs on US$200 billion worth of Chinese products will “cause suffering” for US businesses in China and fail to persuade them to relocate to the United States, the trade group representing the interests of US businesses in China has said.

The group also said about half of the US firms in China were worried about a “strong negative impact” on their operations from an escalated trade war.

William Zarit, chairman of the American Chamber of Commerce (AmCham) in China, said China would be able to “dig its heels in”, preventing a short-term resolution to the trade war, and “no one will emerge victorious from this counterproductive cycle”.

Zarit said the Chinese government had plenty of measures to disrupt the operations of US firms in China and Trump’s hopes of bringing US businesses back home were misplaced.

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“This will not result in bringing more business back to American soil: just 6 per cent of our member companies say this current US-China trade dispute would make them consider relocating operations back home,” he said in the statement.

US President Trump has decided to impose fresh 10 per cent tariffs, starting from next Monday, on US$200 billion worth of imports from China before increasing them to 25 per cent on January 1, marking a significant escalation of the dispute between the world’s two largest economies.

China has promised to retaliate against the move by adding tariffs ranging from 5 to 25 per cent on US$60 billion of US products.

Trump had threatened that if China retaliated against the latest measures, the US would “immediately pursue phase three”. This would mean imposing tariffs on another US$267 billion worth of Chinese products – effectively covering almost all Chinese exports to the US.

The Chinese government has been trying to woo multinational businesses, including US firms, to agree with its line on trade rather than back Trump’s tariffs.

According to a statement on the Ministry of Commerce website, Chinese Commerce Minister Zhong Shan held talks with representatives from six multinationals on Monday, promising them that China’s market would be more open to them and that Beijing would enhance intellectual property protection.

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The six multinationals were Cohen Group, Emerson, SAP, HSBC, Samsung and Toyota, the statement said.

Meanwhile, China has approved foreign investments such as giving Tesla the nod to build a factory with exclusive ownership – instead of the usually required joint-venture model – in Shanghai in July, and ExxonMobil the go-ahead this month for a US$10 billion chemical plant in Guangdong.

According to AmCham, however, more than half of US firms said they “have experienced a rise in non-tariff barriers [in China] in recent months”, including increased inspections and slower customs clearance.

AmCham said “the best way forward is an imminent return to results-oriented negotiations” between Beijing and Washington.

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Timothy Stratford, a former assistant US trade representative and now managing partner in law firm Covington & Burling’s Beijing office, said on Tuesday on the sidelines of the World Economic Forum, in the northeastern Chinese port of Tianjin, that Beijing would not target US businesses in China. Beijing does not want to push the US towards investing elsewhere and sourcing products outside China, he said.

On the sidelines of the World Economic Forum in the Chinese port of Tianjin, Timothy Stratford, a former assistant US trade representative and now managing partner in law firm Covington & Burling’s Beijing office, said Beijing faced a dilemma in how to respond.

Stratford said Beijing indicated earlier that it would take qualitative measures but not retaliate against US businesses in China because they did not want them to invest and source elsewhere.

“It’s a very difficult policy decision on China’s part to find just the right touch to do this, and they are still sorting this out,” he said.

“They are going to try to show they will stand up to the US and not just be pushed around, but I don’t think they want to be seen as escalating things.”

Additional reporting by Wendy Wu