American Companies Struggle with Investment and Confidence in China Amid Trade Tensions

According to a survey released by the U.S.-China Business Council, American firms operating in China are experiencing unprecedented difficulties, as they report the lowest levels of new investment plans this year. The survey highlights a decline in profit confidence among these companies, largely fueled by uncertainty in U.S.-China relations and the ramifications of tariffs imposed by President Trump.

With China's economy showing signs of weakness, including sluggish domestic demand and an oversupply in various industries, American companies are grappling with lower profitability. Sean Stein, president of the U.S.-China Business Council, noted that as profits dwindle, businesses face rising challenges that encompass reputational, regulatory, and political risks.

The survey, which surveyed 130 member companies between March and May, comes in the wake of heightened tensions over trade, including tariffs and restrictions on sensitive exports. Despite recent high-level negotiations between U.S. and Chinese officials aiming to ease tensions, businesses remain cautious as a long-term trade agreement has yet to be achieved.

Significantly, the survey revealed that more than half of the participating companies indicated they do not have any new investment plans in China this year—a figure that sets a new record. Additionally, around 40% reported negative repercussions stemming from U.S. export control measures, such as loss of sales and strained relationships with customers due to their status as unreliable suppliers.

The survey results also reflect a broader trend, with 27% of American businesses expressing intentions to relocate their operations outside of China, marking an increase from 19% the previous year. While only 82% of U.S. firms reported profits in 2024, fewer than half maintain a positive outlook for the Chinese market, citing ongoing concerns about tariffs, deflation, and an unpredictable policy environment.

Interestingly, traditional concerns regarding China's regulatory environment and intellectual property issues did not rank among the top worries this year. Stein remarked that this shift signifies that the challenges emerging from the U.S. side are now posing significant threats, overshadowing previous worries related to operations in China.

Despite these challenges, nearly all American firms acknowledge that maintaining competitiveness on a global scale is dependent on their presence and operations within China. A separate survey from the European Union Chamber of Commerce in China corroborates these findings, noting reductions in investment and cost-cutting measures among European firms as China’s economy continues to falter.