The minions are happy to let the Dark Lord bring out the Louisville Slugger.
U.S. Companies Vouched for China During Trump’s First Term. Not Anymore.
Executives are more pessimistic about opportunities and see risks in advocating Beijing’s cause
By Stu Woo, WSJ
Updated Jan. 2, 2025 12:11 am ET
SINGAPORE—During Donald Trump’s first term, U.S. companies argued that a trade war with China was bad for Americans.
Businesses including Apple, Nike and small retailers said raising tariffs on imports from China would raise prices for consumers. Farmers and other businesses that exported to China warned about retaliatory tariffs from Beijing.
Now, as Trump prepares for his second administration, American companies have largely gone silent about the importance of the U.S.-China relationship. That is because American businesses no longer see China as the land of opportunity.
The promise of China’s market has faded as its once-booming economy hits trouble. And Beijing and Washington have implemented policies that make it harder for American businesses to succeed in the land of 1.4 billion people.
“U.S. companies are more wary about doing business in China,” said Anja Manuel, the executive director of the Aspen Security Forum and a consultant for American companies doing business abroad. “You see that across all industries.”
In 2023, China trailed only Mexico and Canada as a buyer of U.S. products. American exports to China totaled $147.8 billion that year, according to the U.S. Census Bureau.
Still, that was down about 4% from the previous year. The U.S. trade deficit in goods with China—the figure that looms large in Trump’s mind—was $245 billion in the first 10 months of 2024, according to the Census Bureau.
While many U.S. companies still have big stakes in China, others have scaled back. The American Chamber of Commerce in China, which represents more than 800 mainly U.S. companies in the country, said its members have gone to other countries for new investments.
The big problem is China’s economy, the world’s second-biggest after the U.S. For decades, it grew at nearly 10% annually. It was on track to gain 5% in 2024, but economists say that target will be tougher to hit in 2025.
U.S. companies used to put up with the difficulties of doing business in China, including potential loss of intellectual property and pressure from state-owned companies, because of the growth potential.
Starbucks shows how that has changed. In 2016, then-chief executive Howard Schultz said China could become the coffee company’s biggest market. Since then, Starbucks has been undercut by local chains selling cups of joe for $2 or less, and has fallen behind domestic leader Luckin Coffee.
Local companies such as Luckin Coffee sell drinks for a lot less than U.S. brands operating in China.
Local companies such as Luckin Coffee sell drinks for a lot less than U.S. brands operating in China. Photo: Qilai Shen/Bloomberg News
“The competitive environment is extreme,” said new Starbucks CEO Brian Niccol in October, adding that the company was looking at partnerships in China.
U.S. businesses in China face increased competition from both state-owned enterprises and private businesses benefiting from subsidies or policies, said Michael Hart, president of the American Chamber of Commerce in China.
In a push for self-sufficiency, the Chinese government is requiring state-owned companies to replace the American technology that had dominated its computer infrastructure, such as Microsoft and Oracle products, with domestic alternatives.
In August, IBM said it was shutting down its China research-and-development department, affecting more than 1,000 people, because of intensifying competition in China.
In 2007, the CEO of General Motors said transferring technology and expertise to China was worth it for access to the Chinese market. For much of the past decade, GM sold more vehicles in the Asian nation than in the U.S.
But in December, GM said it expected to take more than $5 billion in noncash charges in the fourth quarter because of weakness in its China business. The company said its market share in China has fallen from 13.7% in 2018 to 8.4% in 2023. Chinese brands now dominate. Besides innovating in electric vehicles, Chinese automakers such as BYD have benefited both from direct government subsidies as well as subsidies to consumers buying Chinese cars.
General Motors says its market share in China has fallen.
General Motors says its market share in China has fallen. Photo: Cfoto/Zuma Press
Washington has also made it harder for American companies to do business in China via both policies and the political atmosphere.
Sen. Tom Cotton (R., Ark.), a Trump ally, recently summed up the reputational risk for companies lobbying about China business: “If you get in the ring on China’s behalf, you should expect to be punched,” Cotton told a Wall Street Journal conference.
Both the Trump and Biden administrations used export controls to block sales to China of technology they deemed important to national security, such as chips from Nvidia and other companies that can be used for artificial intelligence. U.S. officials have said they have effectively denied or revoked requests to sell tens of billions of dollars worth of technology to China.
In Trump’s first term, he increased the average effective tariff rate on Chinese imports to roughly 11% from around 3%, according to one analysis. President Biden mostly kept those duties in place, and Trump recently proposed an additional 10% tariff on all products from China.
Many American companies, led by Apple, have built supply chains that rely on contract manufacturers in China producing goods for export to the U.S., which face those tariffs.
Apple Chief Executive Tim Cook publicly and successfully lobbied to get tariff exemptions during Trump’s first term and is likely to do so again. At the same time, Apple has been diversifying its production to countries such as Vietnam and India, and it too is having a tougher time winning over Chinese consumers against local competitors such as Huawei.
U.S. companies that have spent a lot of time and money in building businesses in China are no longer inclined to defend those investments with public lobbying campaigns in Washington, said Kurt Tong, a former U.S. diplomat who is now managing partner at the business-advisory firm The Asia Group.
“If a business goes to Congress or the administration and says our investment in China generates income, jobs or exports for the United States,” Tong said, “the counter is: But you should just invest that in the United States. End of conversation.”
It isn’t that businesses with a stake in China suddenly like tariffs. Some are still trying to persuade Trump’s team to hold off, but they are quieter about it.
Some retail executives have said tariffs would have consequences. “The vast majority of that tariff will probably be passed on to the consumer as a price increase,” Best Buy CEO Corie Barry said in November, referring to Trump’s pledges to raise tariffs on imports from China and Mexico.
Hart, the American Chamber of Commerce in China president, said he still believed sudden disengagement from China would be a mistake. “It would do great damage to the U.S. economy, it would do great damage to U.S. companies,” he said.
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