China based US companies say tariffs are hurting

The majority of American companies in China say they are hurting from the escalating US-China trade spat, reporting increased costs, lower profits and stepped-up scrutiny, a survey showed Thursday.

The American Chamber of Commerce in China polled more than 430 US companies operating in the country, providing the first detailed look at how Donald Trump’s trade fight has harmed business.

His first round of tariffs this summer hit $50 billion in Chinese products like high-end technology parts and manufactured goods, while Beijing fired back dollar-for-dollar at US soybeans, autos and other farm goods.

But US firms are feeling whiplash from both sides as they sell and make goods in China, with Washington’s border tax increase and Beijing’s counter-punch hurting more than 60 percent of businesses, according to the poll.

It also showed looming tariffs on $200-billion of Chinese goods is expected to expand the pain to three-quarters of firms.

Chamber president Alan Beebe said the poll would provide officials in Washington and Beijing with facts on how the tariffs are playing out.

Businesses received potentially good news on Wednesday after US Treasury Secretary Steven Mnuchin proposed a fresh round of trade talks between the economic superpowers to avert a full-blown trade war.

The talks could stave off the growing costs for American firms, though the two sides have failed to reach an agreement over several rounds of negotiations in spring and summer.

The unpredictability around the trade fight is hampering investment decisions as investors need stability to make sound decisions, Beebe said.

Roughly a third of firms are shifting supply chains out of China, or the US, and an equal proportion are delaying or cancelling investment decisions, the survey showed.

The data, when coupled with the results of a similar survey of European firms, is troubling for the health of China’s economy, already slowing under the weight of Beijing’s battle to cut its debt mountain.

The survey released Thursday by the European Union Chamber of Commerce in China polled nearly 200 European firms doing business in China and found 17 percent are delaying investment or expansion plans.

The trade fight impact is overwhelmingly negative, said Mats Harborn, president of the EU Chamber.

“We share the concerns of the US regarding China’s trade and investment practices, but continuing along the path of tariff escalation is extremely dangerous,” warned Harborn.

Some 42 percent of American firms report their goods are becoming less attractive to Chinese buyers. Beebe said that could be the consequences of price increases or the psychology around how people make purchasing decisions.

“Chinese customers just see too much uncertainty around buying American and as a result they shift to alternatives,” Beebe told AFP.

About half of American firms are making less money, and a similar amount are reporting higher production costs, according to the survey.

Some of their employees are paying the price, with 12 percent of firms cutting staff.

Beebe said that may be because survey respondents were mostly smaller firms, adding larger companies “have the ability to withstand the impact of the tariffs but it’s going to be the smaller ones that are going to feel the pinch sooner”.

The White House believes China will wave the white flag after the next round of tariffs on $200 billion in goods, said William Zarit, the chamber’s chairman.

“But that scenario risks underestimating China’s capability to continue meeting fire with fire,” he added.

US companies are particularly worried about the “qualitative measures” Beijing has threatened to take as it becomes unable to respond to tariffs dollar-for-dollar — US goods imports last year totalled only $130 billion.

More than half of firms say they are already feeling Beijing’s wrath, with 27 percent reporting increased inspections, 19 percent feeling heightened regulatory scrutiny and 23 percent witnessing slower customs clearance.

“The US administration runs the risk of a downward spiral of attack and counter attack, benefiting no one,” Zarit said.