00:00We were just talking about the tariff regime.
00:01Obviously, it was a year ago when we were last here in this exact spot at the AmCham booth,
00:06talking to people as Donald Trump was being elected and giving his victory speech.
00:12It's been a tumultuous year on the trade front.
00:15Give me an assessment based on what you saw in your September business confidence survey of American members
00:21and the impact that it's had, the tariffs, on confidence.
00:26Certainly, for our members, we've gone through a lot.
00:30And the U.S.-China bilateral relationship is definitely the number one concern.
00:35We're looking for some stability, some predictability.
00:39We hide tariffs that are hurting everybody, hurting both sides.
00:45We're standing in front of some California wines.
00:49Currently, they're subject to over 100% terror still.
00:54But I think after the Pusan meeting, we are seeing some progress, right?
00:59The U.S. side has decided to lower its fentanyl tariff by 10 percentage points.
01:05And China has stepped up, stepped back also.
01:08So I think we're looking for some more stability in the next 12 months at least.
01:13What has it done to the U.S.-China relationship commercially?
01:17Geopolitically, we know it's very tenuous right now.
01:19How badly has it damaged the commercial relationship?
01:22Well, we have kind of three challenges, frankly.
01:26The number one is geopolitical uncertainty.
01:30Number two is really fierce domestic competition here, too.
01:34And these Chinese companies are becoming very, very competitive.
01:37And number three is really the slowdown of the economy.
01:40So those are the three challenges that our companies are faced with here in China.
01:45But our companies still see this market as very significant for them.
01:51And look at CIE.
01:53And we have many U.S. companies participating in this one.
01:59And they see the market as significant enough.
02:02So they try to showcase their products here.
02:05Now, our pavilion, American pavilion here, focuses more on agricultural products.
02:11So we had very good news from Busan that the Chinese side is willing to purchase more soybeans from the U.S. side.
02:22By the end of this year, China is committed to buy 12 million metric tons of soybeans from the U.S.
02:29But they didn't buy from the beginning of the harvest.
02:31So this was a political bargaining chip that the Chinese employed.
02:35There's no guarantee that the soybeans, obviously, is going to offset the overall trade imbalance coming into China of U.S. goods.
02:44Where do you need to see better improvement?
02:46In what other sectors?
02:48So I think we definitely need more soybeans so that farmers and ranchers can sell more to this market.
02:56But in addition, I think our companies have to sell more in other industries, not only manufacturing, but services.
03:03So I think we're faced with still some challenges, structural challenges ahead of us.
03:10But at least at this point, we have a temporary truth.
03:14And the two leaders are planning to visit each other next year.
03:19So that will give us some temporary stability.
03:22And China will host AIPAC next year.
03:24And the U.S. will host G20 next year in Miami.
03:28So I think at least in the next 12 months, we'll have a little bit more stability.
03:34That's always good for us, our companies operating in China.
03:38So in September, you had the most recent China business confidence survey of your members in your chamber.
03:46It was not very good.
03:48Obviously, we had about six, seven months into the tariff regime.
03:51We're just looking about diversifying supply chains, those that were going to be moving their or diversifying their operations or supply chains out of China at 47 percent.
04:01It's quite high.
04:02And their five-year outlook for a fourth consecutive year was at a record low.
04:07Does this reproachment at all, this de-escalation with the leaders meeting, does it move the needle at all?
04:14Or is the de-risking and the diversifying going ahead on both countries' side?
04:22Keep in mind that we did our survey after April 2nd when the trade war started.
04:30And the companies were very concerned about the future, obviously, from a trade relationship standpoint.
04:37And certainly, diversification, strengthening of supply chains, that's been going on for quite a while.
04:44And after COVID, you mentioned that 47 percent number, meaning 47 percent of our companies who were originally planning to put more capital into China, they move it to somewhere else.
04:58So the companies are still here, but they diverted some of the capital to other locations.
05:04I think you're calling it shock-proofing those supply chains.
05:07But that's a long-term trend, isn't it?
05:09Yeah, it is happening.
05:11Certainly, friend-shoring is happening in a significant way.
05:15Half of our companies, among those 45 percent, over 51 percent, move their supply chains to Southeast Asia.
05:26So that's friend-shoring.
05:28Some to India, a little bit to Mexico.
05:31But reshoring is not happening in a big way, only 18 percent.
05:37Okay.
05:37So because I think the U.S. has to do a lot more in terms of rebuilding its infrastructure, its ecosystem for manufacturing, even skilled labor, in order to attract more investors coming to the U.S.
05:51It's still early days.
05:52It's just a week since those two leaders met.
05:55Are you seeing any tangible evidence that the countermeasures that China put in place to counter Trump's tariffs, they've relaxed some of them?
06:04Are you starting to see those countermeasures coming back off?
06:10Well, I think the Chinese side is committed to this suspension, right, of certain countermeasures, including rare earth exports and so forth.
06:20And that's just for 12 months.
06:22So it's certainly the two sides have continued to talk to each other.
06:27And I think our hope is that we can go beyond that.
06:31Right now, my understanding is that companies continue to apply for licenses for rare earth exports, and they're getting some of those.
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