U.S. companies moving business away from China due to tariffs

(File Photo PATRIK STOLLARZ/AFP/Getty Images)

Are U.S. companies heeding President Donald Trump’s advice/order to look for alternative sources?

American companies are steering business away from China at an increasing rate, according to the American Chamber of Commerce in Shanghai.

With the trade war between Washington and Beijing showing no signs of relenting anytime soon, the results of AmCham’s annual survey showed that U.S. firms have redirected investment away from China, Fox Business reported.

Of 333 respondents, 26.5 percent say they are looking elsewhere, with technology, hardware, software and services companies, industrial manufacturing and chemicals leading the way.

“The causes are manifold, but include a need to guard supply chains from any further deterioration in U.S.-China trade relations and attendant tariffs; a Chinese regulatory environment that still favors domestic companies; and growing labor and material costs in China,” AmCham said.

Trump was quick to respond last month to China raising tariffs on U.S. goods.

“The Chinese State Council said it decided to slap tariffs ranging from 5% to 10% on $75 billion U.S. goods in two batches effective on Sept. 1 and Dec. 15,” CNBC reported at the time. “It also said a 25% tariff will be imposed on U.S. cars and a 5% on auto parts and components, which will go into effect on Dec.15. China had paused these tariffs in April.”

Not only did the president raise tariffs on Chinese products, he ordered American companies to stop conducting business with the country.

Taking to Twitter, he told U.S. companies they “are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

Trump named the top U.S. carriers in calling on them to stop deliveries of Fentanyl.

“Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop – it didn’t,” he said in a series of tweets.

And while the media opted to ridicule Trump for his rhetoric — the president can’t arbitrarily order companies to do anything — the AmCham survey may suggest that the businesses got the message.

Higher tariffs are a factor in the decision and, according to the AmCham report, U.S. firms said restrictions to accessing the local market in the mainland are also having an effect on business.

Businesses in other countries also appear to be moving away from China.

More from Fox Business on the impact on Beijing:

China’s economy was already slowing down before the trade war began when Trump on March 1, 2018, announced tariffs on imports of steel and aluminum. It grew between 6.6 percent and 6.7 percent for the two years from mid-2016 to mid-2018, before slowing to a 6.2 percent growth rate in the second quarter of this year.

“It is not just short-term trade diversion; medium-term production relocation has also started,” Nomura research analysts Sonal Varma and Michael Loo wrote in a note published Wednesday.

 

At the same time, President Trump doesn’t get a break in the media, with Axios reporting that only a small number of the companies leaving China plan to return to the U.S.

“13% of American companies with operations in China have moved or plan to move all or part of their business out of China, but only 3% plan to move those to the US.” Axios tweeted. “It undercuts White House arguments that the trade war is causing US companies to return.”

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