MNI INTERVIEW: China-U.S. Trade War Hurts EU Companies

By Iris Ouyang

     BEIJING (MNI) - European companies may see profits drop as the trade war

between the world's two largest economies hits their operations, the EU Chamber

of Commerce in Beijing said on Tuesday.

     "Blunt tariff instruments affect everything," Jacob Gunter, Policy and

Communications Coordinator at the Chamber, told MNI at the sidelines of a press

event held by the organization, which represents European businesses in China.

     "There are so few industries that don't have some sort of production or

supply between the EU, China and the United States," Gunter said.

     The first shots fired in the China-U.S. trade war, in the form of

reciprocal 25% tariffs on $34 billion of mutual imports, are already starting to

weigh on European companies' operations by disrupting supply chains and

production processes, thus hurting the bottom line, Mats Harborn, president of

the Chamber, told MNI.

     As the majority of European companies in China focuses on supplying the

domestic Chinese market, rising production costs stemming from the imposition of

tariffs between China and the U.S. place European firms at a disadvantage

compared to their Chinese counterparts, who source inputs domestically, Gunter

told MNI.

     --DEPARTURE "UNTHINKABLE"

     Despite this dilemma facing EU companies in China, Gunter said "leaving the

Chinese market would be unthinkable."

     According to the Chamber, one European producer of advanced measurement

equipment has already started a new company in the U.S. to offset the negative

impacts of the trade spat.

     The company, which wasn't named by the Chamber, has not moved production

out of China, but has redirected supply chains to assemble in the U.S., Harborn

and Gunter said.

     But the problem is not so simple to deal with for all European companies.

Automakers, for example, are trapped in a delicate balance between China and the

U.S., the top two biggest auto markets.

     --"QUITE DESPERATE"

     "At this moment, they are quite desperate about finding ways," Harborn told

MNI. "You need to re-shift and rearrange the whole production line and the

staff." Some have localized their production in China, he added.

     Harborn pointed out that contrary to some beliefs, the trade war between

China and the U.S. has not benefitted EU businesses in terms of securing new

contracts.

     "Few companies said they had been awarded contracts from China" at the

expense of American competitors, Harborn said. In any case, businesses prefer

winning through "open and fair competition," he added.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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