KRWG

American Business People In China React To Latest Tariff War

May 14, 2019
Originally published on May 14, 2019 5:26 am
Copyright 2019 NPR. To see more, visit https://www.npr.org.

RACHEL MARTIN, HOST:

There are casualties in wars. The same holds true in the trade war between the U.S. and China. In between the rhetoric and the escalating tariffs, there are people in both countries whose fortunes hang in the balance - business people, farmers and consumers. The Office of the U.S. Trade Representative has come out with a list of another $300 billion of Chinese goods that it could target. That came after China announced tariffs on $60 billion worth of American products, which was in retaliation to a tariff increase from the Trump administration a few days earlier.

So another potential casualty in this war are American business people working in China. To talk about that, I'm joined by Jacob Parker. He's vice president at the U.S.-China Business Council, an association of the largest U.S. companies in China. He joins us on the line from Beijing. Jacob, thanks for being here.

JACOB PARKER: My pleasure.

MARTIN: What are you hearing? What are you hearing over there? Businesses getting nervous at this point - I mean, I imagine they have been for a while.

PARKER: Well, we're seeing three key trends from our member companies on the ground here in China. The first is that the tariffs have led many of our companies to put future investments in the China market on hold. That doesn't mean they're divesting in China, but they're re-evaluating their exposure to the Chinese market. They're - the uncertainty is forcing them to consider alternative destinations for investment.

Most of our companies are in China to access the local market. And the tariffs that have been imposed as a retaliation against the U.S. tariffs have increased their cost. And they've also - the reputation of U.S. companies as reliable suppliers has also taken a hit. Many customers are beginning to diversify away from U.S. products towards other suppliers because of the consistency in price and supply can no longer be guaranteed because of the uncertainty of these tariffs.

MARTIN: I mean, you - your association is made up of big companies. Is this the case also for smaller or medium-sized corporations?

PARKER: Well, what we've seen is that some of our companies in the small and medium-sized category that manufacture primarily in the United States and export to China are looking at diversifying their production outside of the United States. One company noted that the cost of steel and aluminum tariffs have increased production costs in the United States for them by nearly 15%. Additionally, their competitors abroad can access similar alternatives at a lower price, making their products more price competitive.

Those companies that are manufacturing in the U.S. and employing U.S. citizens who are exporting to China are once again getting hit by the tariffs when their products are exported to China as a result of the Chinese retaliation. That eliminates the competitive advantage of manufacturing in the United States and has led many of our companies to consider how they can diversify their exposure to the United States and look at other markets where they can manufacture and export to China to remain cost competitive.

MARTIN: Where are they looking?

PARKER: They're looking at Mexico. They're looking at Southeast Asia. These are, again, primarily just for the small and medium-sized companies that are manufacturing in the U.S. for export to China.

MARTIN: Yeah. I want to play you a clip from President Trump. He's speaking at the White House yesterday. And in this bit, he's talking about Treasury Secretary Steven Mnuchin.

(SOUNDBITE OF PRESS CONFERENCE)

PRESIDENT DONALD TRUMP: Steve just got back from China. We'll let you know in about three or four weeks whether it was successful. You never really know, right? But I have a feeling it's going to be very successful.

MARTIN: Very successful - President Trump seems to be optimistic about how this ends. Are you and the people you represent?

PARKER: I think that we are very concerned about the escalation, both on Friday by the Trump administration and the announcement overnight of 300 billion in new tariffs. Our organization and our member companies would like to see the two sides stop this tit-for-tat escalation and return to the negotiating table. Based on our understanding, the substance of the agreement is primarily finalized. The two sides just need to agree on how they can get this thing enforced and how they can get the tariffs drawn down. And the U.S. business community is very focused on finding a constructive solution to these problems.

MARTIN: Do you think this has done long-term damage to American companies and their relationship with the Chinese market?

PARKER: Absolutely. What we hear from the Chinese government is that there is concern that the extreme escalation of the tariffs has moved beyond just the idea of addressing the issues raised in the 301 investigation on forced technology transfer and IPR protection and is about a containment of the Chinese government and also trying to get them to agree to certain things that go beyond these very narrow focus of the 301. We're concerned that that could have an impact on the ability of the two sides to de-escalate this going forward.

MARTIN: Jacob Parker, vice president of the U.S.-China Business Council in Beijing, thank you so much.

PARKER: Thank you. Transcript provided by NPR, Copyright NPR.