Trump, tariffs, sanctions: According to the EU Chamber of Commerce, the prospects for European companies in China are more unclear than they have been for a long time. “It is truly unique that we find ourselves in a situation in which so much is just a guessing game,” said Chamber President Jens Eskelund in Beijing. Given the inauguration of Donald Trump as the new US President on January 20th, it is impossible to form an opinion about what the world will look like in three weeks.
Trump had threatened further tariffs on Chinese products and inflamed the simmering trade dispute between the world’s two largest economies. Both countries are now repeatedly sanctioning companies from the other country. The USA is already demanding high tariffs on some Chinese products such as electric cars and solar cells. Beijing is countering with export controls for important raw materials.
Isolation of the China business
European companies in China are also feeling the strain in world trade. According to a report by the EU Chamber of Commerce, European companies are increasingly isolating their China business from the rest of their international operations to avoid being disadvantaged by Chinese regulations. According to Eskelund, the automotive sector is particularly affected, but also the IT and telecommunications sectors and the medical sector.
Three quarters of the 113 chamber members who responded justified their adaptation in China by adapting their products or services to the needs of customers there. They hope for better market access. But the measures often do not guarantee this. However, 36 percent of companies also stated that they comply with Chinese regulations. This includes Beijing’s requirement to give preference to products manufactured purely in China in public tenders. 24 percent also stated that they would protect themselves from geopolitical risks in this way.
Isolation problematic
A major sticking point are security concerns of Chinese companies or customers who buy from EU companies. They want to ensure that their products meet China’s requirements and do not fall victim to export controls from third countries. “This is a powerful incentive for European companies to locate in China,” explained Eskelund. The companies would have to show their customers that they manufactured a Chinese product and relied on a Chinese supply chain.
Despite the high costs, insulation is currently still worthwhile for some companies. But the EU Chamber warns that this would make companies less efficient and globally competitive. In research and development, for example, companies would have to work twice as much in order to also work on a product that is compatible with China. This costs a lot and is less efficient. The EU Chamber explained that isolating IT systems in China in order to comply with Chinese guidelines also has the same consequences.
