European Chamber Survey on the US-China Trade War Finds More Companies Making Difficult Strategic Changes to Adapt to the Indefinite Nature of the Tensions Go back »

2019-10-10 | All chapters

European Chamber Survey on the US-China Trade War Finds More Companies Making Difficult Strategic Changes to Adapt to the Indefinite Nature of the Tensions

Summary of findings

  • Roughly one in four respondents import supplies/goods from the United States (US) that are affected by the tariffs, with 19 per cent of total respondents saying prices have gone up and 5 per cent stating that prices have remained stable. 
  • Nevertheless, the number of affected European companies in China that raised prices dropped, with nearly 60 per cent saying they would keep prices the same. 44 per cent of affected companies changed suppliers and others redirected their global production around the US-China ‘border’. 
  • The share of respondents exporting goods to the US that are hit by American tariffs climbed to 35 per cent, but a strong majority are keeping their prices the same.
  • Most respondents are still monitoring the situation, but others have taken more drastic steps, with 3 and 8 per cent moving relevant production out of the US and China respectively, while 6 per cent increased investment in China, chiefly to onshore supply chains and in order to negate the tariff risk. 
  • However, 15 per cent indicated that they have delayed investment/expansion in China  
Many European firms have managed to mitigate the worst effects of the US-China trade war by adapting their strategies and supply chains to circumvent the US-China trade ‘border’ and avoid the heavy and broad-reaching tariffs imposed by the two sides. Some companies have successfully leveraged either their own global operations or highly diverse supply chains across other markets to shift production accordingly to dodge the tariffs entirely. Other companies that cannot make such changes have taken advantage of the high-quality reputation enjoyed by European brands that are not easily replaced, meaning they can often pass along costs without sacrificing much market share. Nevertheless, European companies in China continue to experience significant challenges brought on by the US-China trade war, with many seeing supply chains disrupted and others being forced to raise prices on goods sold both in China and the US.
 
The European Union Chamber of Commerce in China continues to agree with the US’ frustrations over the structural issues in China’s economy, but disagrees with the application of tariffs as a means of resolution. The European Chamber believes leaders in both the US and China should instead engage in good faith negotiations to end the trade war and meaningfully advance China’s reform agenda. 
 
“China needs timely and wide-ranging reforms, and the right amount of strategic pressure can help move things in the right direction, but there doesn’t appear to be anything strategic about the ongoing application of tariffs,” said Jörg Wuttke, president of the European Chamber. “In contrast, the EU has just concluded yet another free trade agreement (FTA), this time with the Mercosur Bloc in South America. We need something similar in China, and it is disappointing to note the limitedprogress in the talks on the EU-China Comprehensive Agreement on Investment, all while the EU concludes one FTA after the other.”
 
To access the complete survey and the European Chamber’s analysis, please download here:

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Yichi Zhang

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