When September started, the first round of President Donald Trump’s tariffs on Chinese-made goods kicked off. China responded by imposing its tariffs on some U.S. goods included in a $75 billion target list.
As the tension between the United States and China intensifies, American companies operating in China are the ones caught in the cross-fire. What happens to them now that the first round of tariffs has been imposed?
According to a survey conducted by the US-China Business Council, 87% of U.S. companies in China said they will not be leaving or moving out amid the trade war between two of the biggest economies in the world.
With the refusal of some companies to leave China, this could either mean that they willing to ride-out the on-going trade war or this could reflect badly on the United States. It’s like the U.S. government is going against the interests of American companies in China.
If some U.S. companies refuse to move out of China even when tariffs are being imposed on Chinese-made products by the U.S. here and there, they probably have their reasons. It wouldn’t come as a surprise if one of the main reasons is because of profits.
In the USCBC annual member survey that was completed in June, it says that 97 of the 100 surveyed companies said that their operations in China are profitable.
Despite threats from President Trump, U.S. companies invest about $6.8 billion in China in the first half of this year alone. That’s 1.5% more than what was invested over the same period in the past two years.
Apart from this, China has impressive and extensive industrial supply chains. Compared to some countries in the region, China has managed to rise among the rest when it comes to this. Other countries are still playing catch-up but if they play their cards right, they might have the potential to compete with China.
Some U.S. companies who have taken their businesses out of China have moved to countries like Vietnam and India.
Also, China is set to become the world’s largest consumer market this year. Any company who says it does not want to profit from this must be lying. China will be overtaking the United States in this regard. Despite the slowdown in its economy, it’s retail growth is faster-than-expected.
With Washington’s tariff imposition, it seems that it has affected the U.S. economy. In the second quarter of the year, the GDP growth was at 2%. This is lower than the 3.1% recorded in the first quarter.
It has also impacted consumer spending. As the trade conflict with China continues, businesses and consumers are taking the brunt. With Trump’s tariffs in place, it can cost the average American household $1,000 more per year.
If the United States and China continue with this trade war, both countries would only be giving a heavy burden on its consumers. If there is no trade agreement by this year, it is set to become a difficult year. If nothing comes to fruition in 2020, then it’s going to get even worse for both sides.