USCBC Members More Concerned About Chinese Tech Self-Sufficiency Push

An annual survey of U.S. firms with operations in China that are members of the U.S.-China Business Council found that about 80% of firms said that U.S.-China tensions affected their businesses. Of that group, about half said it caused lost sales in China; about a quarter said they lost sales due to Chinese retaliatory tariffs.

The majority of respondents said the tensions were causing a change in strategy, with about a third saying they were choosing to locate supply chains closer to customers as a result of the tensions, and a quarter saying they were localizing more production, data or services in China to maintain access to those opportunities.

At an Aug. 5 press conference announcing the survey results, USCBC President Craig Allen said that although tariffs were ranked fifth on a list of concerns by businesses, it should be noted that 40% of the 107 survey respondents are service companies, and therefore not affected by tariffs. Allen said that large companies have had time to find workarounds for tariffs, but that some small and medium-sized companies are still really struggling. The USCBC's members tend to be large U.S. corporations, like General Motors, Archers Daniels Midland, Visa and Coca-Cola.

About 40% of firms said the gains in the phase one agreement with China were not worth the cost of the Section 301 tariffs. The survey suggests that the practices that the Office of the U.S. Trade Representative identified in the Section 301 investigation are getting worse, not better, in some sectors. Allen said that three years ago, only 12% said China's desire to become self-sufficient in technology was a problem, but now 38% see that as a problem for their ability to compete in the Chinese market.

Allen said that a decade ago, 94% of survey respondents said China was one of their company's top five priorities. This year, it was 74%. "Still high, but a marked decline."

Allen urged China and the U.S. to reopen trade negotiations so that tariffs can be rolled back. He said the two countries cannot have a healthy relationship with such broad tariffs on each other. But he also noted that despite the rising tensions and the far higher tariffs than a few years ago, trade continues to expand.