Record number of US companies consider exit from China as tensions with Trump rise

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A record number of U.S. companies in China are considering or already in the process of moving some operations out of the country, according to a new study, as geopolitical tensions rise with Donald Trump's return to the White House.

The American Chamber of Commerce's annual survey in China found that 30% of respondents were exploring alternative sources of goods and moving manufacturing out of the country last year, or had already done so double the percentage in 2020 .

Michael Hart, president of AmCham China, said that while the majority of U.S. companies were not moving, the trend toward offshoring was unmistakable.

I don't see any reason to think that bilateral investments will increase over the next two years, Hart said. Businesses [are] pivot or strengthen their supply chain by investing elsewhere.

Certainly… I would be worried if I were in charge of Chinese investment policy, he said.

American and Chinese companies are bracing for the consequences of Trump's protectionist trade plans.

While the new US president this week delayed implementing his most serious threats, including a blanket 60 percent tariff on Chinese goods, he reiterated that Washington could impose a 10 percent levy on from February 1 if Beijing did not clamp down on exports. of precursors to fentanyl, the deadly synthetic opioid.

He also ordered U.S. officials to review trade with China, including supply chains that use other countries to circumvent exposure to tariffs.

The AmCham survey conducted between October and November found that 44 percent of companies considering offshoring cited trade tensions between the United States and China.

Another important reason was risk management, with many companies looking to strengthen their supply chains in the wake of the Covid-19 pandemic. I don't see this trend slowing down, Hart said.

The AmCham survey found that developing countries in Asia were the top destination for businesses, with 38 percent of them setting up there. Developed economies such as the United States, the European Union, Japan and South Korea have also become more attractive.

By industry, technology and research and development groups were among the most likely to move, with 41 percent moving or considering doing so.

The Biden and Trump presidencies have sought to restrict China's access to advanced technologies such as semiconductors and electric vehicle batteries, while Beijing has retaliated by choking off exports of essential minerals, as part of an escalating technological war between the world's two largest economies.

The number of U.S. companies that did not rank China as a high investment priority also increased, reaching 21% last year, more than double the 2020 level.

Chinese authorities have sought to improve the business climate for international companies this year as foreign direct investment has fallen to record levels.

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Confidence among foreign businesses and investors in China has deteriorated in recent years after authorities raided consulting firms and auditors and instituted vague regulations governing cross-border data flows.

But a third of U.S. companies surveyed said that despite growing geopolitical tensions, the quality of China's investment environment had improved, an increase of five percentage points from the previous year.

China continues to be a very important market, Hart said, adding that was a message AmCham was trying to communicate to people in Washington.

Market access, a long-standing complaint of foreign companies in China, remains a significant problem, as does growing competition from local rivals.

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