The U.S.-China trade war is taking its toll. A few American businesses, particularly those in the automobile sector, are feeling the heat as they perceive getting hit by new tariffs from both the U.S. and China, according to a recent survey conducted by the American Chamber of Commerce (AmCham) in Shanghai and Beijing-based American Chamber of Commerce in China. (See also, Why the US-China Trade War May Cause A Bear Market?)
Auto Sector to Get Worst Hit
In July, China raised the import duty on U.S. vehicles to 40 percent. The development was a result of the two nations implementing tariffs on around $50 billion worth of trade goods from the other. The initial round of tariffs by both the U.S. and China on $50 billion worth of goods has impacted the automobile industry, as per the responses gathered in the survey.
Among the category of “Industries most impacted by initial $50bn tariffs,” automobile appears at number three in both the lists, with 80.5 of the respondents claiming that the industry was hit with the U.S.-imposed tariffs, while 75 percent claiming that the industry was hit with the China-imposed tariffs.
Top two ranks in the U.S.-imposed tariff list include machinery (82.6 percent) and electronics (81.3 percent), while the corresponding positions in the China-imposed tariff list include agribusiness (88.9 percent) and chemicals (80.8 percent). Based on the survey report, automobiles sector is the only one which found the same high-ranking third place on both the lists.
In terms of impact on business operations across industries, the automobiles sector again figures prominently in the top five. More than 60 percent of the survey participants opine that tariffs will result in reduced profits and increased cost of production. Chemicals and Machinery are other two sectors to appear in top five of the above list of impact on business operations. To circumvent the problem, close to 50 percent of the respondents suggest sourcing components and/or assembly from outside China, or sourcing components and/or assembly from outside the U.S. as an alternative business strategy. A quarter of respondent are considering relocating the China-based automotive manufacturing to other nations of Southeast Asia. (See also, How to Invest in China's Auto Industry?)
The challenge is big for American companies which have part of their supply chains routed through the Asian major, or which run a significant portion of their business operations in China. They are likely to be hit by the dual impact of tariffs.
The survey was conducted among more than 430 AmCham China and AmCham Shanghai member companies between August 29 and September 5. It included 36 members in automobile and transportation sector. While AmCham Shanghai does not disclose its membership publicly, the prominent members of AmCham China include General Motors Co. (GM), Ford Motor Co. (F) and Harley-Davidson Inc. (HOG). (See also, GM's Stock May Fall As Much As 10%.)