Tariffs Top Concern for US-China Business Council Members
The US-China Business Council released its annual member survey, which shows almost all U.S. companies operating in China are concerned about the impact of tariffs on their business. Tariffs jumped from the eighth-highest concern in last year's survey to number two in this year's, with the highest being U.S.-China relations.
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The survey found that 68% of companies already have been impacted by tariffs on US-China trade. These effects have been "particularly severe" for manufacturing and technology companies, "with nearly 90% of respondents in that sector affected." The survey noted that several of the companies surveyed responded prior to April 2 or "Liberation Day," so the actual impact of the tariffs may be even higher.
Seventy-five percent of respondents said that rising input costs for China manufacturing due to tariffs is a "top cost concern" and "nearly 40%" of businesses surveyed plan to "reorient supply chains." Strategies for reorientation include "diversifying away from China, deepening localization in China, developing China-specific and region-specific supply chains" or some combination of the three.
For companies unable to localize, many are "exploring" how to shift parts of their supply chains out of China, which the survey notes "may help explain the increase in companies relocating operations." The reorientation is a "continuation or acceleration" of plans that companies had before the new tariffs, the survey said.
The "primary destinations" for companies seeking to relocate their supply chains are "Southeast Asia (71%), India (41%), and Mexico (41%)," the survey found. Around 20% of companies plan to "partly" relocate supply chains to the U.S., and 30% percent of respondents are in "wait-and-see mode," which the survey said suggests "that more companies may shift supply chains if conditions worsen."