- 'Repetitive swings of the tariff hammer have proven anything but strategic,' according to EU Chamber of Commerce
- But smaller European companies 'taking a steady beating' as a result of tariffs
US tariffs have failed to attract investment to the United States or pressure China into structural reforms, an influential European business lobby group has said after its research suggested large companies had found ways around the charges.
Large European companies operating in China had "effectively sidestepped" tariffs imposed by Washington and Beijing, the European Union Chamber of Commerce in China said in its latest survey on the tariffs on Monday.
However, its survey of firms found that smaller companies were taking "a steady beating" as a result of tariffs.
"China certainly needs timely and wide-ranging reforms, and the right amount of strategic pressure can help move things in the right direction, but repetitive swings of the tariff hammer have proven anything but strategic," chamber president Joerg Wuttke said.
"That European companies in China have effectively negated tariff effects in a relatively short space of time only serves to highlight the futility of bilateral tariffs in a global marketplace."
Wuttke also said that US-China trade talks had yet to resolve structural economic issues in China that had long been a source of complaint from foreign business communities.
Large companies with global footprints had re-routed the origins and destinations of US or China-bound products to avoid the US-China trade border, "rendering the bilateral tariffs ineffective", the survey found.
The chamber said that many companies were moving production out of China, mostly to Southeast Asia and India, and just as many were increasing investment into China, to move supply chains there for products aimed at Chinese customers.
The survey was conducted from September 12 to 20, after the US imposed 15 per cent tariffs on US$125 billion worth of Chinese products on September 1. The chamber first conducted the survey last year, after the trade war began.
For imports from the US that had been subject to China's tariffs, the number of European firms that chose to keep product prices the same was twice as great as those that raised prices to pass the costs along to customers, the survey suggested. The first survey had suggested there was an even split.
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For exports to the US that were subject to US tariffs, the number of European firms keeping prices unchanged was four times the number that cut prices. In the previous survey, the ratio stood at 3.5 to 1.
"European companies have clearly adapted to survive in an extended trade war rather than hunker down in the hope that it will run its course, but the smaller companies that cannot leverage global supply chains to avoid the costs are continuing to take a steady beating," the chamber said.
Smaller firms passed the added costs to their customers, bore those costs themselves or changed their suppliers, the survey suggested.
With new 15 per cent tariffs on US$165 billion of Chinese products due to kick in on Sunday, Beijing and Washington are negotiating to finalise an interim trade deal. Their trade war has dragged into an 18th month, while tensions over Hong Kong and Xinjiang have cast doubt on the prospects of a deal.
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Wuttke said the expected substance of a so-called phase one US-China deal was "disappointing because it does not address the systemic issues that actually affect China's trade relations", such as subsidies, market access and advantages enjoyed by state-owned enterprises.
"Anything that the US and China are now working out is basically managed trade " you buying from here and I lower trade barriers for you " so in between, there is nothing really for other nations such as (members of) the European Union," he said. "And I wonder if managed trade really fits in the multilateral open market which has been driving globalisation. It seems to me (it's) the opposite."
Larry Kudlow, the White House's economic adviser, said last Friday that the US and China were "close" to a deal but that the US was prepared to walk away if some of its demands, including about enforcement of the deal, were not met.
Separately, China said on Friday that it would waive import tariffs for some pork and soybean purchases from the US.
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