China-based US firms mull transfer to South Asia

Louella Desiderio | September 24, 2018 – 12:00am

As global trade war heats up

MANILA, Philippines — American firms in China are considering relocating to Southeast Asia and the Indian subcontinent amid escalating trade tensions between the world’s two biggest economies, according to a survey by the American Chamber of Commerce in the People’s Republic of China (AmCham China).

Titled “Impact of US and Chinese Tariffs on American Companies in China,” the survey covered over 430 companies engaged in various sectors including manufacturing, services, and retail and distribution.

The survey, which was conducted from Aug. 29 to Sept.5, showed 64.4 percent of respondents have not relocated and are not considering moving manufacturing facilities out of China while18.5 percent said they are looking at Southeast Asia as a possible relocation site and 6.3 percent picked the Indian Subcontinent which covers India, Bangladesh, Pakistan and Sri Lanka.

Only six percent, meanwhile, are considering moving back to the US.

Other locations being considered for relocation are East Asia (4.2 percent), Europe (4.2 percent), and Latin America (3.9 percent).

Firms eyeing Southeast Asia as a relocation site are those engaged in consumer products, technology and telecom hardware, automotive sector, chemicals, and other industrial products.

Based on the survey results, more than half or 60 percent of American companies have been negatively affected by the tariffs imposed on an initial $50 billion worth of goods from both China and the US.

For the second round of tariffs, 74.3 percent of American companies expect to be negatively impacted by the move of the US to slap tariffs on $200 billion worth of goods, while 67.6 percent anticipate negative effects from the Chinese tariffs on $60 billion worth of items.

“Over twice as many companies anticipate a strong negative impact if the second round of tariffs are implemented,” the survey read.

The Office of the US Trade Representative said the 10 percent tariff on the $200 billion worth of Chinese imports would be effective starting Sept.24.

In response, China is imposing tariff on $60 billion worth of imports from the US on the same day the new US duties take effect.

Survey respondents said the combined tariffs would result in loss of profit (50.8 percent), higher production costs (47.1 percent), and decreased demand for products (41.8 percent).

While only 11.8 percent of the  respondents have reduced employees, the second tranche of tariffs is expected to raise the percentage.

As China warned it would  use other measures in addition to tariffs to hit back at the US, 52.1 percent of the respondents said they suffered from such measures particularly through increased inspections (27.1 percent), slower customs clearance (23.1 percent) and other complications from increased bureaucratic oversight or regulatory scrutiny (19.2 percent).

Source: https://www.philstar.com/business/2018/09/24/1854030/china-based-us-firms-mull-transfer-south-asia