Foreign manufacturers in China are encountering significant challenges as they face high tariffs on both imports and exports, with duties reaching as much as 125% on imported components and 145% on goods exported to the United States. This situation is a consequence of the trade war that has escalated under former President Donald Trump’s administration, which has intensified tariffs between the two countries.
According to official data, international companies and joint ventures make up nearly one-third of China’s total trade, underscoring the impact that these tariffs have on foreign operations. Many large US companies, including Apple and Tesla, along with smaller producers, use China as a manufacturing hub. These companies often import raw materials or components, which are assembled into products for export. As a result, they face the possibility of paying both US and Chinese tariffs on the same goods.
Economists have pointed out the double burden on foreign firms in China. “Foreign firms are really being squeezed in the Chinese market,” said Heiwai Tang, director of the Asia Global Institute at the University of Hong Kong. “If they import, they pay Chinese tariffs. When they export back to the US, they pay US tariffs.”
In 2024, foreign-invested companies were responsible for $980 billion of China’s exports and $820 billion of imports. While their contribution to the total trade has declined over the years, foreign companies still account for a significant portion of China’s trade activity. These firms play a key role in China’s export-driven economy, leveraging the country’s low-cost labor market for manufacturing.
However, the situation is complicated further by Beijing’s trade policies, which have shifted towards greater self-reliance, reducing the share of foreign-invested companies in total trade. Foreign firms now represent 29.6% of trade value, down from 55% in 2008.
Some foreign companies, particularly those relying on American inputs, are feeling the impact. Michael Hart, president of the American Chamber of Commerce in China, noted that even non-American firms dependent on US materials are facing challenges due to the tariffs. He also mentioned that the Chinese government is exploring the possibility of granting exemptions for certain sectors.
China does offer some tariff exemptions for imports used in processing trade—goods that are imported for assembly and then re-exported. Some large US manufacturers, including certain electronics producers, have received temporary tariff exemptions from the US government. However, many smaller foreign companies are finding it increasingly difficult to operate under these tariff conditions, particularly when exporting from China.
Jacob Rothman, CEO of Velong Enterprises, a China-based producer of kitchenware and home products, highlighted the impact on his business, which imports raw materials from the US and faces double tariffs on products containing these materials. Despite some exemptions for goods re-exported to the US, Rothman noted that products destined for other markets outside the US do not qualify for these exemptions.
The trade war has also contributed to a decline in foreign direct investment in China, with a 27.1% drop in 2024 compared to the previous year. Economists have warned that the ongoing trade tensions could further affect investment, especially for companies targeting markets outside China. Qiu Dongxiao, head of the economics department at Lingnan University in Hong Kong, noted that companies aiming to serve markets like the US may need to reconsider their global strategies in light of the current trade environment.
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