In Depth: Chinese Manufacturers Put Off Overseas Investment Plans as Tariff War Explodes

[para. 1] The global trade situation has been significantly impacted by the policies of U.S. President Donald Trump, particularly affecting Chinese companies with international expansion plans. The uncertainty created by these policies has led many Chinese companies to reconsider their strategies for global markets.

[para. 2] On April 2, Trump announced "reciprocal tariffs" that varied between 10% and 49% on multiple trading partners, with a specific 34% increase on Chinese products. In retaliation, Beijing imposed similar levies on U.S. goods, prompting Trump to further escalate tariffs on Chinese imports by an additional 50%, bringing the total increase to 104%.

[para. 3] The Chinese government responded by raising tariffs on all U.S. products to 84% and placing additional American entities on its export control and unreliable entity lists.

[para. 4] These U.S. tariffs have severely impacted Chinese companies, especially those reliant on the U.S. market. The increased costs are becoming unsustainable and cannot easily be transferred to consumers.

[para. 5] Businesses have adopted a "wait-and-see" approach due to rapidly changing policies and unpredictable outcomes, creating a stasis among companies unsure how to proceed.

[para. 6][para. 7] Southeast Asia had been a preferred location for Chinese manufacturers to reduce costs and avoid U.S. tariffs. However, new tariffs up to 49% in countries like Cambodia, Vietnam, Thailand, and Malaysia have caused businesses to reconsider or delay relocating manufacturing outside China.

[para. 8] Companies, like a Guangdong-based underwear firm, have suspended overseas site plans due to heightened trade pressures, waiting for more stable conditions.

[para. 9][para. 10] GCL Technology Holdings, a Hong Kong-listed photovoltaic manufacturer, has revised its overseas expansion plans. Initially planning a major factory in the UAE, the company is now cautious about such investments given the U.S.'s aggressive trade stance.

[para. 11] The company is treading carefully on international endeavors, monitoring the evolving global economic landscape to avoid irresponsible financial commitments.

[para. 12][para. 13] Caution has permeated the industry, with many companies in the photovoltaic sector waiting to see the tariff impacts before investing in new markets.

[para. 14] Despite the chaos in international trade, experts suggest that Chinese firms will not halt international expansion altogether but will adjust their strategies accordingly.

[para. 15] Observers advise that Chinese companies need to assess the changes and implications of new tariffs before making strategic decisions.

[para. 16] Chinese companies still see potential in relocating operations to Southeast Asia, driven by favorable government policies and improved infrastructure, though they remain cautious due to existing tariffs.

[para. 17][para. 18] The U.S. market remains significant, but Chinese companies are exploring other opportunities, such as leveraging the EU-Vietnam Free Trade Agreement for better access to European markets.

[para. 19] Countries such as Turkey, less affected by Trump's tariffs, could become pivotal transit points for Chinese goods reaching Europe and the U.S.

[para. 20][para. 21] Despite challenges, Latin America continues to attract Chinese manufacturers aiming to export to the U.S. market, with logistical services expanding to facilitate trade.

[para. 22] Some companies, like GCL Technology, still consider the U.S. market essential. They are contemplating establishing production facilities there, though costs remain a deterrent.

[para. 23] GCL Technology notes that U.S. manufacturing costs are significantly higher than elsewhere, which presents a substantial barrier to direct investment in the American market.