The rapid deterioration of relations with the US has caught Chinese businesses off guard. Many companies find it difficult to shoulder the huge additional costs and lack viable options to immediately modify their supply chains. Some export industries in China will be hit harder than others with electronics, computer circuit boards, computer parts, furniture, floor coverings and automotive parts disproportionately burdened by the increased tariffs.
The US has increased tariffs on $200 billion worth of Chinese products from 10 to 25 per cent. Many businesses in China are already struggling to stay afloat since the US imposed 10 per cent tariffs in September last year. They say, while they tried to share these costs with their US counterparts, they will now have no choice but to pass on a significant proportion of the latest tariff increase to their customers. The uncertainty and volatility created by the trade war has led to businesses delaying investment and expansion plans. Some Chinese manufacturers have adjusted their supply chains by moving manufacturing and warehousing to south-east Asia, Mexico and Canada. But uprooting supply chains is costly, time-consuming and usually requires companies to obtain new approvals, comply with different regulatory regimes, secure real estate, build factories, hire workers and find new suppliers and service providers.