82% of off-shored US manufacturers in China report tariff pain

The American/China Chamber of Commerce found that 82 percent of American-owned manufacturers in China are suffering significant pain from Trump Trade War tariffs.

‘AmCham’ surveyed business conditions for its 900 member American-owned companies operating across China during the week of May 16-20, following President Trump’s announcement that he was raising tariffs on $200 billion U.S. imports from  China from 10 percent to 25 percent.

The survey found that due to the U.S. action and the retaliatory Chinese response, American-owned companies in China reported that 52.1 percent were experiencing lower demand; 42.4 percent were experiencing higher manufacturing costs and 38.2 percent were seeing higher sales prices for products.

President Bill Clinton called it a “good day for America” on May 24, 2000 when he successfully convinced the U.S. House of Representatives to award China permanent normal trade relations under the rules of the World Trade Organization. Clinton argued:

“In 10 years from now we will look back on this day and be glad we did this. We will see that we have given ourselves a chance to build the kind of future we want.”

Although China/WTO was championed as an opportunity to U.S. companies to compete for the business of over 1.3 billion emerging Chinese consumers, the vast majority of AmCham members operate off-shored production facilities for export back to the U.S.

As a result, U.S. imports from China from 2001 to 2015 increased from $102.3 billion in 2001 to $483.2 billion in 2015, while U.S. exports to China during the same period only grew from $19.2 billion to $116.1 billion.

It is generally accepted that between 2001 and 2015, the WTO deal with China cost about 3.4 million American jobs, with about 74.3 percent of losses due to U.S. companies off-shoring production jobs to China for cheaper labor and lower taxes. The estimated American worker wages is estimated at about $37 billion per year.

The AmCham survey found that due to the tariff battle, 35.3 percent of members have adopted an “In China, for China” strategy. But members also report indirect retaliation by Chinese authorities against U.S.-owned companies in China, including 20.1 percent suffering increased inspections, 19.7 percent experiencing slower customs clearance, and 14.2 percent facing slower license approvals and greater regulatory scrutiny. 

Approximately 33.2 percent are canceling further investments in China and 40.7 percent of respondents have already relocated manufacturing facilities outside China. The most popular manufacturing relocation spots have been 24.7 percent in Southeast Asia, 10.5 percent in Mexico and 6 percent back to the United States.

The majority of AmCham members understand that the Trade War has created a severe deterioration in bilateral U.S. and China relationships. Although 42.7 percent of members would support a quick deal for a return to the status quo, 53.3 percent of members indicate they now “favor negotiations continuing towards a deal that addresses structural issues allowing them to operate on a more level playing field.”

Chriss Street is an economist and cofounder of the New California movement.