U.S. Firms in China Say Tariffs Boosting Costs, Crimping Demand

(Bloomberg) — U.S. businesses operating in China say trade disputes between the two economic powers have increased manufacturing costs and decreased demand for products, warning that an escalation could cause even greater pain.

That’s according to an Aug. 29 to Sept. 5 survey of more than 430 American companies conducted by AmCham China and AmCham Shanghai. The polling found that more than 60 percent of the firms were hurt by the initial round of tariffs between the two governments, with 74 percent foreseeing harm from future U.S. tariffs and 68 percent from potential Chinese retaliatory duties.

The U.S. and China have engaged in a series of tit-for-tat tariff tariffs since July, when President Donald Trump started slapping duties on $50 billion of Chinese imports. Trump raised the stakes last week, announcing he’s willing to impose tariffs on an additional $267 billion in Chinese goods, on top of a proposed $200 billion his administration is already considering. China has said it would be forced to retaliate to all of the U.S. measures.

With the new round of trade barriers, “the U.S. administration runs the risk of a downward spiral of attack and counter attack, benefiting no one,” said William Zarit, chairman of AmCham China.

Short-Term Pain

Trump administration officials counter that the short-term pain of its trade dispute will become worth it when China agrees to buy more American-made products and better shield U.S. companies from intellectual-property theft. They say previous strategies of prolonged negotiations with Beijing failed to protect American companies and workers.

But the AmCham survey underscores the damage that trade barriers could impose on economies in both countries by denting production, boosting prices and slowing investment. The U.S. Federal Reserve in a monthly survey published Wednesday also said American companies are growing increasingly concerned about the fallout from a trade war.

Respondents of the AmCham survey were primarily in manufacturing, with automotive, machinery and chemical producers expected to take the biggest hit from future tariffs. Profit losses, higher manufacturing costs and decreased product demand were some of the biggest downsides of the tariffs, according to the report. Nearly one-third of respondents are considering delaying or canceling investments, especially those in the agribusiness industry.

“This survey affirms our concerns: tariffs are already negatively impacting U.S. companies and the imposition of a proposed $200 billion tranche will bring a lot more pain,” said Eric Zheng, chairman of AmCham Shanghai.

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