HONG KONG — U.S. multinational corporations are facing an increasingly hostile trade environment as Washington and Beijing impose escalating tariffs, export controls and competing regulations.
The trade conflict began in 2018 under the Trump administration, which imposed substantial tariffs on Chinese goods. Average U.S. tariff levels on these imports increased over six-fold after 2018, covering two-thirds of all Chinese goods entering the United States. Most tariffs remained in effect after the Phase One trade deal signed in 2020. The Biden administration has maintained these tariffs and broadened the restrictions by implementing export controls designed to limit China's access to advanced semiconductors.
China filed a World Trade Organization complaint against the U.S. and responded with its own restrictions. The resulting economic decoupling poses immediate risks for multinational corporations still operating in both markets.
Despite the political hostility and economic costs, U.S. multinationals have found it difficult to retreat from China. The country remains a critical hub for global supply chains and a vital consumer market. China has continued to attract record foreign investment, and many multinational companies now generate a greater share of their global sales from China than before the trade war began.
A study published in the peer-reviewed journal Business Politics examined how American multinationals have responded. Jack Zhang, an assistant professor of political science at the University of Kansas who directs the KU Trade War Lab, co-authored the research with Samantha Vortherms of the University of California, Irvine, and Rigao Liu of the University of Kansas.
The researchers sampled 500 subsidiaries of U.S. multinationals in China using the Foreign-Invested Enterprises in China dataset and correlated the data with the political behavior of their U.S. parent companies. The study investigated corporate strategies including seeking tariff exclusions, publicly opposing tariffs, circumventing tariffs, passing costs to consumers, or divesting from Chinese operations.
Larger foreign investors in China tend to be more diversified and less reliant on the Chinese market than smaller counterparts, according to the research. This diversification helps mitigate risks in the current geopolitical climate.
The U.S. and China are locked in competing regulatory frameworks covering sanctions, export controls and technology restrictions. Companies face mounting pressure to align with either the American or Chinese economic sphere, with potential penalties from either government for failing to comply with its rules.
