Trump tariffs encourage US companies to shift plans away from China
President Trump’s ongoing trade war with China may be causing some companies to rethink their business strategies, as he predicted.
According to a survey from Bain & Company, the tit-for-tat tariff escalation has allowed companies to “reassess their business strategy.” Sixty percent of companies said the tariffs on China provided the opportunity to recalibrate their plan.
Part of those recalibrations included redirecting investments from China to other parts of the globe. Twenty-five percent of respondents said they were altering their operations in this manner. Nearly half of companies said the tariffs would cause them to seek new sourcing partners, while 42 percent expected to source raw materials from a different region. Nearly one-in-five said they would modify production to add value outside of China, while 10 percent planned to shutter manufacturing assets in the country.
Trump said in Ireland last week that companies would avoid the tariffs because they would shift their operations back to the U.S. While it is unclear from the data where companies are shifting, it’s clear that some are rethinking their positions in China.
The Bain & Co. survey was conducted earlier this year, among more than 200 executives with operations in China.
According to Bain’s analysis, more than $28 billion of value is at stake in the ongoing trade talks between China and the U.S.
A number of issues led to the imposition of U.S. tariffs, including the country’s treatment of intellectual property. About 60 percent of American companies agree with the U.S. tariffs on Chinese goods, despite the fact that an equal number expect them to increase cost headwinds.
During a recent interview on FOX Business, GoPro CEO Nick Woodman said he wasn’t worried about copycat competition from China because the company was innovating at a faster pace.
Since the survey was released, the Trump administration raised the tariff rate imposed on $200 billion worth of Chinese goods to 25 percent, from 10 percent. In retaliation, Beijing announced it would raise tariffs on about $60 billion worth of American goods.
Trump has also threatened to impose an additional 25 percent tariffs on $325 billion worth of imports from China.
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In May, China’s imports fell 8.5 percent year over year, according to data released on Monday. Exports to the U.S. declined 4.2 percent.
In the midst of that battle, Trump also threatened to impose a 5 percent tariff on goods from Mexico. He rescinded that threat over the weekend after Mexico agreed to take a tougher stance on immigration and buy more agricultural products from the U.S.