US Businesses Lose Confidence Amid Escalating US-China Tensions

US-China trade tensions and tariffs have driven US businesses’ confidence to record lows, with many scaling back investments in China and redirecting capital to Southeast Asia and India. A recent survey by the American Chamber of Commerce in Shanghai revealed only 41% of US firms are optimistic about their five-year outlook in China, the lowest since 1999. Among 254 companies surveyed across sectors, 66% cited geopolitical tensions as their top concern.

The tensions intensified following renewed US tariffs dubbed “Liberation Day” by President Donald Trump, triggering retaliatory measures by China and disrupting supply chains. Though a temporary 90-day tariff pause eased immediate pressures, the overall climate remains volatile and unpredictable.

Eric Zheng, president of AmCham Shanghai, commented: “We welcome the pause but underlying issues remain unresolved. The ongoing uncertainty complicates planning and investment decisions. We hope both governments will work toward a swift resolution.”

Financial impacts are tangible: over a third of firms report sales losses from tariffs, and nearly half see customers shifting away from US products. In response, many companies are diversifying supply chains, favoring markets like Southeast Asia, India, and Mexico to mitigate risk.

“Investment plans have dramatically shifted,” noted Margery Kraus, CEO of APCO Worldwide, at the World Economic Forum. “Supply chain disruptions force companies to rethink growth strategies, diversify geographic footprints and decouple from volatile trade dynamics.”

Beyond tariffs, US firms face increased competition from Chinese companies, export controls, and regulatory hurdles limiting market access. China’s slowing growth and shifting domestic demand further dampen optimism, with a 5% GDP growth target becoming harder to achieve in the current environment.

Despite these challenges, some US businesses maintain profitability and continue to see China’s vast consumer market as essential. However, almost half express pessimism about long-term prospects given persistent policy uncertainties and geopolitical instability.

In summary, the escalating US-China tensions have eroded business confidence, reshaped global supply chains, and triggered shifts in investment strategy. Navigating this fraught environment will require diplomatic thaw, stable policies, and adaptive corporate strategies.