By Professor Andrew Azarov, Business and Economics, International Business academy Consortium (UK)
According to a recent survey by the US-China Business Council (USCBC), American companies’ investment plans in China have plunged to record lows in 2025: only 48% of firms intend to invest in the country, compared with 80% in 2024 (weforum.org). This marks the lowest level since the survey began in 2006 (taipeitimes.com, apnews.com).
Conducted between March and May 2025, the survey of 130 major US firms revealed a sharp decline in optimism. Investment scale is shrinking, and prospects for a recovery in US-China relations remain bleak. Many companies have already shifted into a “risk-mitigation mode” — freezing investments and reassessing strategies (apnews.com).
🌐 Tariff Surge and Political Turbulence
- Tariffs have spiked since April, rising from 25% to 50% in certain categories (ainvest.com, barrons.com, ft.com).
- In USCBC’s survey, tariffs have jumped from 8th to 2nd place among business concerns, second only to overall bilateral tensions. In 2024, tariffs were only ranked eighth (weforum.org).
- Nearly 70% of firms are directly affected by tariffs, while 88% cite the deteriorating relationship as a major challenge (weforum.org).
- Over one-third of companies report sales losses from US tariffs; 27% have been hit by Chinese tariffs — up 21 percentage points year on year (weforum.org).
Although negotiations in Geneva and London brought temporary relief through partial tariff rollbacks, the absence of a long-term settlement leaves businesses facing deep uncertainty (apnews.com, deccanchronicle.com).
📉 Profit Decline and Confidence Erosion
- 82% of companies reported rising profits in 2024, but fewer than 50% remain optimistic about future prospects (uschina.org).
- The share of loss-making businesses has grown significantly over the past three years following a long period of stability (uschina.org).
- 42% of large companies report negative effects from China’s overproduction model, citing fierce price wars — particularly in healthcare and consumer goods (ft.com, businesstimes.com.sg).
- Roughly 32% of companies have lost market share in China over the past three years; 70% fear further losses within the next five years (uschina.org).
🔄 Supply Chain Reorientation and Diversification
- 27% of firms have already relocated or plan to relocate parts of their production outside China — the highest level since 2016 (apnews.com). In 2024, this figure was 19%.
- Popular alternatives include Southeast Asia, India, and Mexico (weforum.org, ainvest.com).
- Major players such as Apple and Ford are leading this shift: Apple has committed $1bn to Indian production, while Ford faces $500–1000 in additional costs per vehicle due to metal tariffs and is increasingly sourcing from Mexico (ainvest.com).
- Smaller companies are also following suit, despite higher logistics and quality-control costs.
🧠 Geopolitics, Export Controls, and Regulatory Risks
- Around 40% of companies cite negative impacts from US export controls — including lost clients, cancelled contracts, and reputational damage (ft.com).
- China’s regulatory environment, including industrial subsidies and localisation mandates, continues to create a hostile playing field for foreign firms (uschina.org).
- New measures such as the US Outbound Investment Security Programme (OISP) add another layer of compliance complexity, especially in technology and high-value manufacturing.
📊 Macroeconomic and Financial Implications
- The International Monetary Fund (IMF) warns that US tariff policy risks slowing global growth and stoking inflation. While its 2025 global GDP forecast remains at roughly 3%, risks are tilted to the downside (theguardian.com).
- Examples from industry: Stellantis expects €1.5bn in losses, Philips faces €150–200m in margin erosion, and Procter & Gamble is struggling to maintain profitability (theguardian.com).
- US manufacturing continues to contract, with new orders and employment declining for a third straight month in May (theguardian.com).
- Financial markets remain volatile: US equities fall, Treasuries weaken, while sterling and the euro gain against the dollar (theguardian.com).
🎯 Why Companies Stay — and What Comes Next
Why they are not leaving:
- China remains too big to ignore — its market size and growing middle class are critical to global growth (uschina.org).
- Over 80% of companies still rely on China primarily for domestic market access (uschina.org).
- 28% of firms believe exiting China would severely harm their global competitiveness (ainvest.com).
What could change the outlook:
- Long-term tariff de-escalation and easing of export controls.
- Improved market access for US firms through procurement reforms and regulatory transparency.
- A stabilised political environment supported by consistent US-China dialogue.
✍️ Strategic Recommendations for Businesses and Investors
- Pursue a “China+1” diversification strategy, combining Chinese operations with alternative markets to mitigate geopolitical risk.
- Focus on financial resilience, prioritising firms with robust supply-chain flexibility.
- Establish risk management committees to monitor regulatory shifts and geopolitical tensions (wsj.com).
- Integrate ESG factors into supply-chain planning, including climate and sustainability considerations.
📌 Conclusion
The collapse in US corporate confidence in China is not merely a reaction to tariffs or trade disputes. It reflects a deeper transformation of the global economic order. While China remains an indispensable market, companies can no longer treat it as their single pillar of growth. The future belongs to those who adapt — diversifying geographically, managing political risks, and building long-term resilience.