Tariffs: European companies in China say they feel some positive effects

A survey by the European Union Chamber of Commerce in China, released today, concluded that European companies with operations in the country are feeling positive effects of the trade war, with the increase in Chinese tariffs punishing North American competitors.

The survey's findings indicate that its members, while also suffering the global economic impact of US President Donald Trump's trade war, could gain market share from US companies exporting to the Chinese market.

The survey revealed that 19% of companies surveyed are already receiving more business from Chinese and foreign clients operating in the Asian country due to the trade war, while 36% have not yet felt a positive impact but expect to.

“What we hear is that there are a number of European companies that are competing with US companies and perhaps in particular with imports from the United States,” said Jens Eskelund, president of the EU Chamber, in launching the report.

“If these [North American] imports are decreasing and China has to find non-North American suppliers in other countries, that could bring benefits,” he pointed out.

Eskelund stressed that this did not mean that European companies were enjoying a “measurable” net benefit from the trade war, with the economic slowdown and uncertainty weighing on profitability and investment plans.

China has built an effective export machine, but foreign companies, including those from the US, continue to play an important role, particularly in supplying high-quality machinery and components for industrial production.

Companies wholly or partially owned by foreign investors account for about 30% of China's trade value, with many of them using imported components to produce goods in China for local sale or export.

The EU Chamber's inquiry showed that China's 125% tariffs on US-origin goods are having a greater impact on its members than Trump's 145% tariffs on Chinese goods.

About 44% of respondents said they had imported goods from the US that were affected by Chinese tariffs, with the majority saying the price of those items had already increased or would increase.

Most respondents said they would respond to higher prices for US products by switching suppliers.

In contrast, only 31% said they were affected by US tariffs on Chinese goods.

The results differ slightly from a separate survey by the German Chamber of Commerce in China last month. That study found that more members were affected by U.S. tariffs on Chinese goods, but mostly indirectly.

Both surveys suggest that the trade war has seriously dented business confidence, but that European companies are still moving forward with “localization” strategies for their operations in China.

This localization means increasing local sourcing for operations in the Asian country to reduce dependence on imports and decrease geopolitical risk for its Chinese supply chains.

“Despite all this tension, if we want to compete on price and quality, China is still the place we have to be,” Eskelund said. “So even though everyone is talking about reducing risk and everyone wants to be less dependent on China, what we are seeing is a bit of the opposite,” he explained.

According to the official, the trade war is not stopping this trend. “In fact, we are seeing, in a way, dependence on China increasing, not decreasing,” he described.