The trade war U.S.-China has been revolutionizing business between both countries. The situation is becoming unpredictable for all U.S. companies planning or already doing business in Mainland China. In this article, we provide useful tips to overcome the business barriers and uncertainties created by this trade war.
The Trade War US-China in 2018
The U.S. has currently placed tariffs on $250 billion worth of Chinese goods and has threatened $267 billion more, meaning that about 50% of all Chinese imports to the U.S. are now taxed. China has since responded with tariffs on $110 billion worth of U.S. goods.
In June, the U.S. placed tariffs on $50 billion worth of Chinese imports. China matched the U.S. tariffs by planning 25% tariffs on $16 billion worth of U.S. imported goods. These tariffs targeted over 300 U.S. products.
Most recently in late September, the U.S. placed tariffs on $200 billion worth of Chinese goods, China immediately responded with its own duties on $60 billion worth of U.S. products.
There are some reasons why the U.S. hit first and launched the current trade war with China. The White House wants to stop the claimed unfair transfers of American technology and intellectual property to China, protect jobs, and these tariffs will make U.S.-made products cheaper than imported ones, which would encourage consumers to buy American. This suddenly pursued concept appears as though Washington has just realized that the second-largest economy is quickly approaching.
At the current rate, economists predict a U.S.-China Trade War could cut the GDPs of both China and the U.S. by over 1% and severely affect the global economy. However, no official talks to resolve these tariffs have taken place or are currently planned.
Since the conflict began, the situation has been worsening, which is a global topic traveling by word of mouth. Additionally, U.S. companies are especially concerned with the activities in China.
What are the main barriers to U.S. companies?
U.S. companies’ barriers
Economic losses: Many taxed U.S. exports are seeing significant economic losses. U.S. exports experienced a significant reduction in exports to China in late August and long-term implications.
Financial impacts: U.S. firms in China are increasingly concerned with the intensifying U.S.-China relations as tariffs continue to increase. Several hundred American companies have suffered significant financial losses due to China’s tariffs on products in their industries.
Reducing products demand: Many firms that handle in chemical, energy, food, industrial and transportation products fields experienced a rise in production costs from the taxes and a decrease in demand for their products. The tariffs resulted in many U.S. firms raising the prices of their products, which negatively affects both the firms and American consumers.
Industries and products affected
Having summarized the main barriers and tariffs encountered by U.S. companies, the list below includes the currently affected industries:
- Energy Industry: Tariffs on 180 energy products such as coal, diesel, propane, etc.
- Chemical Industry: Tariffs on 1,505 chemical, plastic, and modified ethanol products.
- Farming Industry: Tariffs on 200 farming products such as soy beans, corn, tobacco, grease, wine, fresh fruit, dried fruit & nut products, pork products.
- Transport Industry: Tariffs on 50 products, including passenger aircraft, large passenger cars (SUV category) and motorcycles.
- Industrial Products: Tariffs on 150 products such as recyclables, medical suppliers, scrap aluminum products and stainless-steel pipes.
Furthermore, the industries and products that have not been affected by the new tariffs remain with the previous rates.
Having analyzed the current situation, U.S. companies planning to do business in China should ask themselves the following questions question:
- Is this a wake-up call for U.S. companies that have still not been affected by the U.S.-China trade war?
- How can these companies protect themselves from a possible new round of customs duties embracing new industries?
- What could be a solution for U.S. companies to safely conduct business in China?
At HROne, we provide solutions for these companies with business plans in Greater China.
What are the solutions for U.S. companies to do business in China?
With the trade war in mind, one of the main concerns of U.S. companies is to establish their business in the Chinese market in a safe way. Therefore, at HROne we analyze the situation to find the most beneficial solution for our U.S. clients.
Employment Solutions is one of the best chances to minimize investment risk, save and reduce costs:
Why Employment Solutions?
Flexibility: Employment Solutions allows companies to initiate business operations in China in a short period of one month as it mainly requires to onboard employees on your Chinese partner’s structure. In addition, it also enables companies to stop a company’s presence in China by simply terminating the employees.
Transparency: Allows companies to invoice clients based in China through their local partner as well as receive payments from China.
Efficiency: Companies can immediately hire employees, both, foreign and locals. HROne’s service enables you to outsource your employees’ monthly payroll, individual income tax, social insurances contributions, medical insurance, and visa procedure.
HROne has been assisting foreign companies for over 15 years by reducing the main barriers and risks encountered when expanding into China. We offer employment solutions by means of China Market Test Pack by which companies can easily start their business activities in China without a legal entity within 1 month.