US firms doing business in China mostly oppose tariffs, survey shows

US President Donald Trump holds his signed memorandum on intellectual property tariffs on high-tech goods from China on March 22. Trump has accused China of unfair trade practices that give its firms an advantage, while hobbling American companies and creating an outsized trade deficit for the US. (Reuters)
Updated 12 July 2018
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US firms doing business in China mostly oppose tariffs, survey shows

  • President Donald Trump has accused China of unfair trade practices that give its firms an advantage, while hobbling American companies and creating an outsized trade deficit for the US
  • The biggest operational challenge of all was rising costs, an issue confronting more than 95 percent of respondents, the poll showed

SHANGHAI: Most US businesses operating in China oppose the use of tariffs in retaliation for the challenges they face, from an uneven playing field to poor protection of intellectual property rights, a survey showed on Thursday.
Almost 69 percent of the 434 respondents to the annual China Business Climate Survey of the American Chamber of Commerce in Shanghai opposed tariffs, while just 8.5 percent backed them, the body said.
“Resolving these challenges in an equitable manner is essential for the US and China to have a healthy long-term commercial relationship that brings benefits to both our peoples,” it said in a statement on the survey results.
The survey, conducted between April 10 and May 10, reflects the mix of key concerns and realities for American businesses in China at a time of heightened uncertainty as the Trump administration raises the ante in its trade war with Beijing.
US President Donald Trump has accused China of unfair trade practices that give its firms an advantage, while hobbling American companies and creating an outsized trade deficit for the US.
On Tuesday, the office of the US Trade Representative said it would impose 10 percent tariffs on an extra $200 billion worth of Chinese imports, from food products to tobacco, chemicals, coal, steel and aluminum.
The survey showed that while US companies continue to face challenges in China, 34 percent of respondents felt Chinese government policies toward foreign companies had improved, up from 28 percent last year.
The number of companies that felt policies had worsened for foreign firms fell to 23 percent from 33 percent, although 60 percent of respondents felt China’s regulatory environment lacked transparency, on par with last year.
Insufficient intellectual property rights protection and the need to get licenses were the top two regulatory challenges, although slightly fewer companies found both to be a hindrance in the 2018 poll, compared with that of 2017.
To force greater market access, 42 percent of respondents favored investment reciprocity, up from 40 percent last year. But the number opposing it also grew, to 16 percent, from 9 percent last year. The number of those unsure rose to 44 percent from 31 percent.
“Despite the relative optimism our members feel guarded about the future,” AmCham said in its statement.
Concerns such as government favoritism for domestic firms and pressure on US ones in strategically important sectors to transfer technology were “stoking demand for reciprocity in the US-China trading relationship, even if our members generally oppose the use of retaliatory trade tariffs,” it added.
The biggest operational challenge of all was rising costs, an issue confronting more than 95 percent of respondents, the poll showed. More than 85 percent of respondents saw domestic competition as a challenge.
The proportion of companies expecting to be profitable was basically flat, at about 77 percent, but firms signaled they were pulling back slightly on investment.
The survey showed 53 percent of companies increased investment in 2017, down from 55 percent the year before, highlighting a trend of reduced investment growth since a 2012 peak, when 74 percent of respondents said they had boosted investment in China.


Apple Watch, FitBit could feel cost of US tariffs

Updated 20 July 2018
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Apple Watch, FitBit could feel cost of US tariffs

SAN FRANCISCO: The latest round of US tariffs on $200 billion of Chinese goods could hit the Apple Watch, health trackers, streaming music speakers and other accessories assembled in China, government rulings on tariffs show.
The rulings name Apple Inc’s watch, several Fitbit Inc. activity trackers and connected speakers from Sonos Inc. While consumer technology’s biggest sellers such as mobile phones and laptops so far have faced little danger of import duties, the rulings show that gadget makers are unlikely to be spared altogether and may have to consider price hikes on products that millions of consumers use every day.
The devices have all been determined by US Customs and Border Patrol officials to fall under an obscure subheading of data transmission machines in the sprawling list of US tariff codes. And that particular subheading is included in the more than 6,000 such codes in President Donald Trump’s most recent round of proposed tariffs released earlier this month.
That $200 billion list of tariffs is in a public comment period. But if the list goes into effect this fall, the products from Apple, Fitbit and Sonos could face a 10 percent tariff.
The specific products listed in customs rulings are the original Apple Watch; Fitbit’s Charge, Charge HR and Surge models; and Sonos’s Play:3, Play:5 and SUB speakers.
All three companies declined to comment on the proposed tariff list. But in its filing earlier this month to become a publicly traded company, Sonos said that “the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, could require us to raise the prices of our products and harm our sales.”
The New York Times has reported that Trump told Apple CEO Tim Cook during a meeting in May that the US government would not levy tariffs on iPhones assembled in China, citing a person familiar with the meeting.
“The way the president has been using his trade authority, you have direct examples of him using his authority to target specific products and companies,” said Sage Chandler, vice president for international trade policy at the Consumer Technology Association.
The toll from tariffs on the gadget world’s smaller product lines could be significant. Sonos and Fitbit do not break out individual product sales, but collectively they had $2.6 billion in revenue last year. Bernstein analyst Toni Sacconaghi estimates that the Apple Watch alone will bring in $9.9 billion in sales this year, though that estimate includes sales outside the United States that the tariff would not touch.
It is possible that the products from Apple, Fitbit and Sonos no longer fall under tariff codes in the $200 billion list, trade experts said. The codes applied to specific products are only public knowledge because their makers asked regulators to rule on their proper classification. And some of the products have been replaced by newer models that could be classified differently.
But if companies have products whose tariff codes are on the list, they have three options, experts said: Advocate to get the code dropped from the list during the public comment period, apply for an exclusion once tariffs go into effect, or try to have their products classified under a different code not on the list.
The last option could prove difficult due to the thousands of codes covered, said one former US trade official.