Trade war drives companies to review business plans: AmCham

Singapore

IN the face of trade tensions between the United States and China, members of the American Chamber of Commerce in Singapore (AmCham Singapore) are delaying or cancelling investment plans, looking to other markets, and tweaking supply chains.

Helping members cope is the chamber's top priority for 2019, said AmCham Singapore chairman Dwight Hutchins at the launch on Thursday of a survey on the impact of the trade war.

Of 179 member firms who responded to the November survey, 68 per cent said they were reviewing their business strategies in response to the trade war. The most common move, taken by half of these firms, was delaying or cancelling investment decisions. Firms are also looking for alternatives, whether by increasing their presence in other markets (40 per cent) or adjusting supply chains by sourcing components or assembly outside China (38 per cent) or outside the US (30 per cent).

Some firms are mulling more dramatic moves, with 15 per cent considering relocating some or all of their manufacturing operations out of China, 10 per cent considering a similar move out of the US, and 5 per cent considering exiting China altogether.

But in a panel discussion at the launch, expert vice-president in Bain & Company's Singapore office Gerry Mattios noted that business leaders have a "sit back and wait" approach to taking concrete action. Firms may be re-evaluating supply chains, but shifting manufacturing operations is both expensive and difficult, he noted.

Baker & McKenzie Wong & Leow associate Cindy Owens noted that firms' mitigation strategies include revisiting product classifications of their goods, or making tweaks within their existing supply chain footprint - such that, for instance, the country of origin of their goods might change.

Although a 90-day truce has been called for negotiations, fellow panellist David Hoffman was not optimistic about the chances of a "grand bargain-type deal", "given that what the White House and China want seem almost diametrically opposed".

Mr Hoffman, senior vice-president for Asia at think-tank The Conference Board, noted that a more reciprocal bilateral investment treaty - one that entices US firms to invest even more in China - would not help resolve US concerns over the trade deficit, investment and job creation at home.

Despite trade tensions, firms were cautiously optimistic. Though 78 per cent of all respondents expressed concern about the trade war, only 14 per cent had a negative outlook for the coming six months. The majority (56 per cent) had a positive outlook, with another 30 per cent staying neutral.

As for the impact on business in South-east Asia, only a quarter of respondents said they found it harder to do business in the region since the onset of the trade war.

In fact, one positive side effect of the trade war may have been to raise the region's profile. Two in five respondents felt that South-east Asia has become a more attractive place to do business, whether marginally (35 per cent) or dramatically (5 per cent). Another 36 per cent saw no change. Only 4 per cent thought the trade war had made the region less attractive.