Thursday, November 08, 2018

Trump’s Policy Starts to Backfire on American Consumers, Companies Operating in China
By Wang Jiamei
Global Times
2018/11/8 23:28:41

US President Donald Trump may think a trade war will force manufacturers to move their production chains away from China. But in fact, his attempt will only come back to bite the US.

The damage the trade war between China and the US might do is starting to have an impact on US businesses operating in China. About 85 percent of US companies have been suffering trauma from the combined tariffs, according to the Special Report on the Impact of US and Chinese Tariffs conducted by the American Chamber of Commerce in South China between September 21 and October 10.

The study surveyed 219 companies from not just China or the US but also many other markets like Canada, the EU, Japan, South Korea, Southeast Asia, Australia and New Zealand. Roughly 95 percent of the companies have operations in China. The damage is not just limited to US businesses. Nearly 80 percent of the respondents have experienced a serious impact or negative impact from the trade war on their business operations, with nearly half of them losing market share as a result, according to the study.

The Trump administration intends to hit the Chinese economy by forcing US manufacturers to retreat from the country and reconfigure their supply chains. The goal of disrupting production chains in China through a trade war is simply delusional.

For one thing, few companies would be willing to give up the Chinese market with its huge consumption potential. Giving priority to the Chinese market, most of the companies surveyed see the expansion of the Chinese market as one of the most important remedies for the additional tariffs, the study showed.

Moreover, for many businesses operating in China, the cost advantage of a mature and integrated supply chain, plus relatively low labor costs, is enough to offset the additional tariffs.

Otherwise, it could be extremely challenging and time-consuming for companies to relocate manufacturing lines out of China and to find new suppliers that meet all their production requirements. Issues like that are also likely to raise costs.

But either way, industries are seeing their global supply chains disrupted by the trade war, while consumers are left to pay for the tariffs or the producers' relocation and sourcing costs as companies need to pass on most of the additional costs.

In this sense, the trade war aimed at hitting others ends up biting the US by hurting its businesses and people. As in any war, there is no winner in a trade war.

The author is a reporter with the Global Times.

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