President Trump’s tariffs are causing businesses with branches in China to pack up and move out, but not to the U.S., according to a new industry report. Instead, they’re moving to other Asian countries, an outcome that runs counter to the administration’s goal of bringing back jobs.
The American Chamber of Commerce in Shanghai and the American Chamber of Commerce in South China, which represent U.S. and international companies, said in a report released Friday the tariffs were having a “strong negative impact” on their members, forcing some to relocate.
“[T]he majority, nearly two-thirds (64.6 percent) of respondents, have not relocated and are not considering relocating manufacturing facilities out of China,” the study found. “Among those who are, the top destinations are Southeast Asia and the Indian Subcontinent. Only 6 percent say they are considering relocation back to the U.S.”
In other words, while China may be taking a hit, the companies and their jobs are remaining abroad.
“The tariffs are tactics in search of a strategy,” said Robert Scott, trade policy analyst for the liberal Economic Policy Institute.
“They’re as likely to lead to what economists refer ‘trade diversion’ — diverting trade to some other country — as they are to lead to reduction in the amount of trade. Much more likely, in fact,” Scott said. “China maintains the advantage. They’re just shipping their products to the U.S. through some other port.”
Bryan Riley, trade policy analyst for the conservative National Taxpayers Union, said it was “not surprising” that companies were more likely to relocate within the region than to move to the United States. It’s not just the tariffs directly on Chinese products doing that, either. “Of course, the Trump administration’s tariffs on inputs used by companies to produce in the United States are an additional incentive to manufacture in other countries instead of here,” he said.
Trump has argued that the tariffs can bring jobs back into the U.S. by revitalizing domestic manufacturing.
“Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting!” Trump tweeted in September.
The next day Trump noted a report that Ford would not sell a Chinese-made vehicle in the U.S. due to tariffs. “This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!” he tweeted.
President Trump has placed tariffs on $250 billion worth of good of Chinese goods, covering roughly half of all imports to the U.S. and has threatened repeatedly to put tariffs on up to $267 billion more, which would cover all imports. The administration has also 25 percent tariffs on steel imports and 10 percent aluminum ones, policies mainly intended to protect U.S. industries from cheap Chinese-produced metal.
The tariffs are hitting China-located companies hard, with the South China and Shanghai Chambers saying that 50 percent of members were facing percent lower profits, 47 percent had higher manufacturing costs and 42 percent faced lower demand.
The squeeze will get tougher for them in two months. Currently $200 billion worth of U.S.-targeted goods face tariffs of 10 percent, but the tariffs rise to 25 percent at the beginning of next year.
Administration officials have argued that tariffs will result in production moving back to the U.S. In a July op-ed for the St. Louis Post-Dispatch, White House trade and manufacturing policy adviser Peter Navarro claimed that there was a “tariff-catalyzed renaissance in steel and aluminum production across this great land, with many of the reborn facilities in forgotten, ‘flyover’ communities urgently in need of manufacturing jobs.”
Employment in iron, steel production, and aluminum has risen in the last two years, but the increase has been within the range that the industry has fluctuated within for years. Total employment was 382,300 for September according to Labor Department data, up from 368,100 when Trump took office in January 2017. That is still below the high point of the last decade, when it reached 402,600 at the end of 2014, long before the current tariffs placed on China.
“The U.S. Chamber has said for months that tariffs and retaliatory tariffs could put job creation and economic growth in the United States at risk,” said a spokeswoman for the Chambers. The Asian Chambers are independent organizations not affiliated with the U.S. one.
