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US Companies Cut Investments in China to Record Lows, Here’s Why

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US Companies Cut Investments in China to Record Lows, Here’s Why

American companies have cut investments in China to record lows as tariffs and trade tensions continue to reshape the economic relationship between the world’s two largest economies, according to a recent survey.

The Member Survey 2025 from the US-China Business Council (USCBC) found that only 48% of US companies plan to invest in China this year, a sharp decrease from the 80% who had planned investments in 2024. Moreover, the survey found a steady decline in optimism regarding China’s economic growth forecasts and low confidence in the prospect of improved US-China relations.

The USCBC, a nonpartisan, nonprofit organization comprising more than 270 major American companies that do business in China, conducted the survey between March and May 2025 as US President Donald Trump reignited the US-China trade dispute as part of a broader effort to overhaul US trade policy.

“Spiraling tariff rates after April 2 and on-again, off-again talks have shaken business confidence, derailed investment planning, and led to a souring of the broader relationship,” the report states.

Tariff worries surge

Concerns about rising and fluctuating tariffs have increased significantly amongst US companies operating in China.

In USCBC’s 2025 survey, tariffs ranked as the second most pressing challenge for US firms behind general US-China relations; in 2024, tariffs ranked as the eighth most pressing challenge. The report also found that nearly 70% of companies were directly affected by tariffs and 88% were affected by US-China relations.

“Tensions are forcing companies to reassess their investment strategies in China,” the report stated. “In response to structural issues in the economy and to the political volatility seen in recent years, many US companies are reorienting their supply chains and scaling back new investments in China in the near term.”

A Flourish chart

Tariffs are taking a financial toll, too. The survey found that more than a third of firms lost sales due to US tariffs and half of respondents lost sales because of Chinese customers switching to non-US suppliers due to uncertainty. Furthermore, 27% of companies said they lost sales due to Chinese tariffs, a dramatic increase of 21 percentage points from 2024.

In response, companies are renegotiating prices with suppliers as well as shifting supply chains to alternative international markets. The top three alternative markets, the survey found, are Southeast Asia, India and Mexico.

“The business community just wants to continue to grow, and have the ability to go where it needs to go and where it makes the most sense to do business,” Margery Kraus, Founder and Executive Chair of APCO, said last month during the World Economic Forum’s Annual Meeting of the New Champions in Tianjin, China. “The disruptions in supply chains have already caused some businesses to invest in different places, to diversify and to decouple.”

Nonetheless, the USCBC report found that the vast majority of firms surveyed remain profitable. Slightly less than half, however, are optimistic about the future, citing continued concerns over tariffs and policy uncertainty.

The USCBC survey found that various other factors are also complicating the business environment for US firms operating in China. Such factors include increased competition with Chinese companies, US export controls, China’s industrial policy and localization policies that hinder market access.

Economic growth in China and fluctuating domestic demand are concerns, too. For the past two years, China has targeted 5% GDP growth; yet as noted in the World Economic Forum’s May 2025 Chief Economists Outlook, the 5% growth rate for 2025 will likely “be more difficult to achieve given the roiling of the global trade landscape in recent months.”

In response to the volatility, US firms are focusing on serving core markets, reducing costs and improving efficiencies, and targeting new customers particularly tertiary Chinese cities where consumer spending is rising, the survey found.

‘Too large to ignore’

Despite the significant economic headwinds and ongoing uncertainty, the USCBC survey notes that US companies are unlikely to abandon the Chinese market.

“The ability to operate in China’s fiercely competitive market remains non-negotiable for American companies, allowing them to access a burgeoning middle class while honing new technologies and practices essential for maintaining global competitiveness,” USCBC President Sean Stein added in a statement.

The survey found that 28% of the polled companies believe they would not be able to be competitive globally without operations in China. Moreover, nearly 40% say that China is a key element of their global footprint.

“China’s market is too large to ignore,” the report states. “But confidence will not recover without meaningful tariff reductions and improved market access.”

USCBC delegates met with the China’s commerce minister on Wednesday at a gathering of leading US businesses and Chinese trade officials. The meeting followed trade talks between the US and China in Stockholm earlier this week that sought to forge a more lasting deal and mitigate a trade dispute that could blunt growth in both countries.

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