As the global economy struggles to recover from the COVID-19 pandemic, the relationship between the world's two largest economies remains shrouded in uncertainty. With trade war tensions lingering and disputes over pandemic origins adding new complications, the strained bilateral relationship continues to impact global economic stability. Against this backdrop, the US-China Business Council (USCBC) has released a member survey revealing the realities facing American businesses in China and their outlook on future economic relations.
The report, based on feedback from over 100 USCBC member company executives collected between late May and early June, shows that two-thirds of respondents operate in China while one-third are based in the United States. Despite numerous challenges, American businesses maintain confidence in the Chinese market and are actively developing strategies to navigate this complex environment.
Phase One Trade Deal: A Foundation for Stability?
One of the report's most notable findings concerns business attitudes toward the US-China Phase One trade agreement. Eighty-eight percent of respondents viewed the deal as "positive or somewhat positive." The USCBC noted that corporate support stems not necessarily from the agreement's content, but rather its role as "a stabilizing force in rapidly deteriorating bilateral relations."
USCBC President Craig Allen stated: "Companies are now seeing results from the agreement, particularly opportunities created by market openings. We need to maintain and expand these job opportunities in coming years while finding ways to reduce conflict in other areas."
However, the Phase One deal remains imperfect. While it halted further tariff escalation, $370 billion worth of Chinese goods and over $110 billion in American products still face tariffs. The survey found that only 7% of respondents believed the agreement's benefits outweighed tariff costs, while 36% saw costs exceeding benefits. Fifty-six percent considered it too early to draw conclusions, suggesting "the ultimate effectiveness of the Trump administration's China policy remains to be seen."
Trade Tensions: Business Challenges and Responses
US-China relations remain the primary challenge for American companies operating in China. The USCBC observed: "From investment decisions to cybersecurity and standards setting, intensifying US-China competition affects nearly every aspect of company operations in China. Restoring stable and constructive bilateral relations is critically important."
Eighty-six percent of USCBC members reported that trade tensions have impacted their Chinese operations, with businesses facing specific challenges including:
- Declining sales due to customer uncertainty about supply continuity (49%)
- Supplier or procurement shifts due to supply chain uncertainty (46%)
- Sales declines from Chinese retaliatory measures (39%)
- Sales declines from US-imposed tariffs (39%)
Commitment to China: Long-Term Strategy and Priorities
Despite these challenges, the survey reveals American companies remain committed to China for the long term. Eighty-three percent rank China as their top or top-five global strategic priority, with nearly 70% expressing optimism about China's business prospects over the next five years.
Contrary to some media reports about companies relocating production from China, 87% of respondents indicated no such plans. Only 4% reported having done so, primarily due to lagging Chinese consumer demand. Another 11% have shifted production to other global locations, with Thailand and Mexico emerging as primary destinations.
Supply Chain Restructuring: Pandemic and Trade War Impacts
The COVID-19 pandemic has accelerated discussions about global supply chain restructuring. A recent Gartner report showed 33% of surveyed companies have already moved or plan to relocate procurement and manufacturing operations from China within two to three years. The research firm noted that global supply chains were already facing disruptions before the pandemic, largely due to the US-China trade war, which exposed vulnerabilities in highly outsourced, centralized, and interdependent networks.
Kamala Raman, Gartner senior director analyst for supply chain practice, observed that global supply chain leaders have recognized these weaknesses and begun questioning overly dependent network models.
Conclusion: Navigating Challenges and Opportunities
The USCBC report provides valuable insights into the current realities facing American businesses in China. While confronting trade tensions and pandemic impacts, these companies maintain confidence in the Chinese market and continue developing strategies for sustainable operations. The Phase One agreement has provided some stability, but its long-term effectiveness remains uncertain. Moving forward, both nations must work toward establishing more stable and constructive economic relations to create favorable business conditions.
For global enterprises, supply chain restructuring has become inevitable. Companies must reevaluate global strategies and develop more diversified, flexible, and resilient supply chain systems to navigate future uncertainties.
The future of US-China trade relations remains complex, but one certainty emerges: the fate of American businesses in China remains inextricably linked to bilateral relations. Only through dialogue, cooperation, and mutual understanding can stakeholders create a more stable and predictable future.