Since President Trump’s 2 April ‘Liberation Day’ announcement on global tariffs and subsequent 90-day pause the following week, America’s trading partners have been flying into Washington DC to negotiate trade deals. Stephen Miran, Chair of the White House Council of Economic Advisors, has advised trade partners that investment in US manufacturing can be part of a package for tariff relief.
As these negotiations unfold, foreign companies will be under growing pressure to ramp up their US investments, whether by entering the market, expanding current operations, or reshoring production. The following are recommendations for investors navigating the Trump administration’s policies.
Overlapping tariffs and their impact on supply chains
The White House has issued a web of tariff announcements that overlap and, in some cases, stack, while also issuing a series of exemptions for specific sectors and products. As such, manufacturers must carefully assess their supply chains and understand the evolving tariff landscape to mitigate rising cost pressures. The following tariff announcements require thorough review (dates refer to the date of announcement):
- Fentanyl-linked emergency tariffs of 25% on Canada, Mexico, and China (February 1)
- Section 232 tariffs on steel and aluminium (February 10)
- Exemption from fentanyl-linked tariffs for imports compliant with US-Mexico-Canada Free Trade Agreement (USMCA) (March 6)
- Section 232 tariffs on automobiles and auto parts (March 26)
- Adjustment of tariff rules under existing trade agreements for automobile imports (March 26)
- Emergency “reciprocal” tariffs of 10% on all countries (April 2)
- Emergency “reciprocal” tariffs individualised based on trade deficit (April 2)
- Pause on “reciprocal” tariffs individualised based on trade deficit (April 9)
- Enhancement of “reciprocal tariffs” for China (April 10)
- Clarification on certain exemptions to emergency “reciprocal” tariffs (April 11)
- Clarification on “stacking” of Section 232 and emergency “reciprocal” and fentanyl-linked tariffs (April 29)
- Forthcoming sector-based Section 232 tariffs on semiconductors, pharmaceuticals, lumber, trucks, and critical minerals
The United States is expected to make further changes to this tariff scheme, whether unilaterally or as a result of ongoing talks with trading partners – further complicating global supply chains.
The investment implications of US policy towards China
The US has adopted a strategic policy approach to counter China’s economic influence, implementing measures driven by growing competition and national security concerns. This policy presents both opportunities and risks for foreign investors in the United States.
Opportunities: US policy against China may create competitive advantages for companies competing with Chinese firms, strengthening their position in the US market and providing better conditions for investment. As global industries race against China, South Korea can leverage its strengths in memory chips, display panels, batteries, and shipbuilding; Japan in high-speed rail, high-strength steel for aerospace, and robotics; and the EU in aerospace, pharmaceuticals, and renewable energy.
Risks: A series of US policies aimed at China may present challenges for foreign investors with operations in both China and the United States. These measures include:
- Enhanced export controls on advanced technologies such as semiconductors, artificial intelligence, and quantum computing. The expanded use of the Foreign Direct Product Rule – which allows the US to restrict exports of any US-developed technology, regardless of origin – can have an outsized effect on foreign investors.
- Enhanced national security review of planned US investments by the Committee on Foreign Investment in the United States (CFIUS). Foreign investors with major investments in China and/or close ties to Chinese entities, particularly in advanced technology sectors, may face additional scrutiny.
In response to US tariffs, China has implemented its own import tariffs, as well as export controls on critical minerals.
Finding common ground: aligning business needs with US policy objectives
Despite the complex web of tariff arrangements and justifications, the Trump Administration and the Republican-controlled Congress still share at least two goals: 1) to grow US manufacturing and create American jobs, and 2) to maintain the country’s competitive edge in strategic technologies, including manufactured goods.
While business needs ultimately drive investment decisions, foreign-owned companies may benefit from identifying areas of alignment between their business goals and those of the US government:
- Communications and messaging: Policymakers are likely to respond positively to messaging that highlights how foreign investment serves the US public interest – whether by creating American jobs or advancing critical technologies. However, the strategy behind that messaging – including when, where, and by whom it is delivered – is equally important.
- Investment incentives: While the fate of Biden-era investment incentives (such as the Inflation Reduction Act or the CHIPS Act) remains unclear, some states have already moved forward with their own initiatives to attract investment. States such as Pennsylvania, Texas, and Florida have announced, or are considering, incentive packages for investors in sectors such as manufacturing, autos, and renewable energy.
Ensuring success in a shifting investment landscape
As US policies towards China and tariffs continue to evolve, foreign investors must stay agile and informed to navigate this shifting landscape. Understanding the opportunities and risks, aligning business strategies with US objectives, and carefully managing messaging will be key to success in this environment. The dynamic nature of trade relations presents both challenges and possibilities, and staying ahead of these developments can help mitigate risks and unlock new growth opportunities.
Access Partnership is standing by to help foreign investors navigate these challenges. Our team has supported some of the world’s largest foreign investors in assessing tariff risks and informing decisions on supply chains and new investments. With decades of experience managing the US-China relationship and a global communications team, we can help ensure your messaging aligns effectively with US government objectives.
To find out more about how Access Partnership can help, please get in touch.
