Companies including Apple, Nike and small retailers said higher tariffs on Chinese imports would raise prices for consumers. Farmers and other businesses exporting to China warned of retaliatory tariffs from the Chinese government.
Currently, as President Trump prepares for his second administration, U.S. companies are largely silent on the importance of U.S.-China relations. That’s because American companies no longer see China as a land of opportunity.
The once booming economy has fallen into trouble, and expectations for the Chinese market are fading. And Beijing and Washington have implemented policies that make it difficult for American companies to succeed in the country of 1.4 billion people.
“American companies are becoming more cautious about doing business in China,” said Anja Manuel, executive director of the Aspen Security Forum and a consultant to American companies operating overseas. , “You see it in every industry.”
In 2023, China will be the third largest purchaser of U.S. products after Mexico and Canada. According to the U.S. Census Bureau, total U.S. exports to China that year were $147.8 billion.
However, it was down about 4% compared to the previous year. The U.S. trade deficit with China that comes to mind for President Trump was $245 billion in the first 10 months of 2024, according to the Census Bureau.
While many U.S. companies still have large stakes in China, others are downsizing. The American Chamber of Commerce in China, which represents more than 800 mostly American companies in China, said its members are going to other countries in search of new investments.
The big problem is China’s economy, which is the second largest in the world after the United States. China has been growing at nearly 10% every year for decades. It was on track to rise 5% in 2024, but economists say it will be even harder to reach that goal in 2025.
U.S. companies have traditionally endured challenges doing business in China, such as potential loss of intellectual property and pressure from state-owned enterprises, because of the potential for growth.
Starbucks shows how that has changed. In 2016, then-CEO Howard Schultz said China could become the coffee company’s biggest market. Since then, Starbucks has been eclipsed by local chains that sell cups of Joe for less than $2, and has fallen behind the nation’s leader Luckin Coffee.
“The competitive environment is extremely tough,” Starbucks’ new CEO Brian Nicol said in October, adding that the company was considering a partnership in China.
Michael Hart, president of the American Chamber of Commerce in China, said American companies in China face increased competition from both state-owned enterprises and private companies that benefit from subsidies and policies.
To promote self-sufficiency, the Chinese government is asking state-owned companies to replace U.S. technologies that dominate the country’s computer infrastructure, such as Microsoft and Oracle products, with domestic alternatives.
In August, IBM announced it would close its research and development division in China, affecting more than 1,000 people, citing increased competition there.
In 2007, General Motors’ CEO said it was worth transferring technology and expertise to China to access the Chinese market. In the past decade, GM sold more cars in Asian countries than in the United States.
However, GM said in December that it expected non-cash costs of more than $5 billion in the fourth quarter due to a slowdown in its China business. The company said its market share in China has declined from 13.7% in 2018 to 8.4% in 2023, with Chinese brands now dominating. In addition to electric vehicle innovation, Chinese automakers such as BYD benefit from both direct government subsidies and subsidies for consumers who buy Chinese cars.
Washington also makes it difficult for American companies to do business in China, both through policy and the political atmosphere.
Sen. Tom Cotton (R-Ark.), an ally of Mr. Trump, recently summed up the reputational risks for companies lobbying on Chinese business, saying, “When you step into the ring on behalf of China, you get beaten up.” “You should be prepared to be hit,” Cotton said. Wall Street Journal Conference.
The Trump and Biden administrations have used export controls to block the sale to China of technology they deem critical to national security, including chips from Nvidia and other companies that can be used in artificial intelligence. U.S. officials said they had effectively rejected or withdrawn requests to sell tens of billions of dollars worth of technology to China.
According to one analysis, during President Trump’s first term, he raised the average effective tariff rate on Chinese imports from about 3% to about 11%. President Biden has largely kept those tariffs in place, and President Trump recently proposed an additional 10% tariff on all products from China.
Many U.S. companies, including Apple, have built supply chains that rely on Chinese contract manufacturers to make products for the U.S. that face these tariffs.
Apple CEO Tim Cook successfully lobbied publicly for tariff relief during President Trump’s first term and is likely to do so again. At the same time, Apple has diversified its production base into countries such as Vietnam and India, and has struggled to win over Chinese consumers against local competitors such as Huawei.
Curt Tong, a former U.S. diplomat and current managing partner at a business advisory firm, says U.S. companies that have spent significant time and money building their businesses in China are no longer relying on public lobbying in Washington to do so. He said he would not try to protect his investment. This is an Asian group.
“If a company goes to Congress or the administration and says investing in China will generate income, jobs and exports for the United States, the counterargument is: But you should invest it in the United States. End of conversation,” Tong said. said. . ”
Companies with interests in China do not suddenly prefer tariffs. Some officials are still trying to persuade the Trump campaign to refrain from participating, but have remained silent on this matter.
Some retail executives say the tariffs will have an impact. Best Buy CEO Cory Barry said in November, referring to President Trump’s pledge to increase tariffs on imports from China and Mexico, that “the bulk of the tariffs will probably be passed on to consumers in the form of higher prices.” This will be passed on to the public,” he said.
Hart, president of the American Chamber of Commerce in China, said he still believes China’s sudden disengagement was a mistake. “It’s going to do a lot of damage to the U.S. economy, it’s going to do a lot of damage to American businesses,” he said.
Email Stu Woo at Stu.Woo@wsj.com.
