Both Chinese and American companies are bracing for a possible escalation in the trade war by stocking up on inventory and delaying payments, according to business executives. Speaking on condition of anonymity, the executives said they expected trade tensions to continue rising and that companies were trying to offset the impact of higher costs brought by tariffs and manage their cash flow. “Companies have been pushing through orders from China to increase inventory before the situation further deteriorates,” an executive with a US precision equipment manufacturer said, adding that this could partly explain why China’s trade surplus with the US has continued to grow. The trade surplus expanded to US$34.1 billion in September from US$31.1 billion the previous month as imports from the US slowed but exports to the US were robust, according to official Chinese data. Washington and Beijing have been entangled in a tit-for-tat trade war since July after talks to ease the conflict ended in deadlock. So far Washington has imposed 25 per cent tariffs on US$50 billion of Chinese products and 10 per cent duties on another US$200 billion of Chinese goods. The US has said it will raise all tariffs to 25 per cent from the start of next year, and US President Donald Trump threatened to extend them to all Chinese imports if China refuses to change its industrial policies and address the trade imbalance. China’s economy may suffer under Donald Trump’s cold war but the US shouldn’t count on stopping it Beijing hit back with punitive duties on US products, though it could not match the US in scale, while foreign businesses complained about increased regulatory scrutiny on US imports of Chinese goods. With the conflict showing no sign of abating, Chinese companies are trying to find ways to counter the economic slowdown, according to the head of an outsourcing company in Beijing. “Companies, very large ones, have delayed payment for services such as recruitment fees to human resources firms, not to mention the smaller ones – their priority is to make sure they’ve got enough cash to cover their employees’ salaries,” she said. “The outlook for the economy is bleak. The trade war will have a big impact.” According to a Chinese government adviser who declined to be named, the trade confrontation between Beijing and Washington could escalate further at any time. The US Treasury Department is expected to release a report this week on China’s currency policy, which may lead to additional tariffs and economic sanctions. As Trump continues to boast about the resilience of the US economy on Twitter, in Beijing, officials are grappling with risks such as a debt pile-up, property market bubble and the growing impact of the trade war at a time when the economy was already losing steam. China economic health check may show slowing GDP growth in wake of trade war China is due to release economic growth figures for the third quarter on Friday. The government has said there has been little economic impact from the trade war so far, though observers are pessimistic about export numbers in the last three months. “If the economy can stand up well in the fourth quarter this year, we won’t have too much trouble withstanding further US pressure,” the government adviser said. But foreign businesses in the country are worried about the potential impact. According to recent polls by the American and European business chambers in China, their members are concerned about possible disruptions to their supply chains as a result of the trade war, with rising costs among their biggest worries. An American Chamber of Commerce survey of more than 430 companies found that nearly one-third of US businesses polled said they were adjusting their supply chains by trying to source components or move assembly outside China, and nearly one-third were planning to delay or cancel investment decisions. First tariffs, and now a move to isolate China in global trade. Can the US succeed? In Washington, there is talk of an economic decoupling of the US and China, while speculation is mounting over whether a truce could be called if Chinese President Xi Jinping and Trump meet during the Group of 20 summit in Buenos Aires, Argentina in November. “Sentiment on trade remains low. A possible meeting between Xi and Trump could go some way to alleviating tensions. But that is six weeks away, and the experience of this trade saga so far suggests that is a very long time and there could be multiple plot twists in the run-up to the G20 summit,” financial firm Everbright Sun Hung Kai said in a research note.