SHANGHAI — In the space of 24 hours, President Trump ordered US businesses to leave China and suggested in a tweet that he has the authority to do so.
Whether he has that power is a question for Washington lawmakers and lawyers. Perhaps the more important question is whether severing US businesses from China is at all feasible.
At least in the short term, it’s not. American business is deeply intertwined with China, and untangling it would be messy and potentially destructive for the global economy.
On a long-term level, a shift is already underway. US tariffs and growing tensions between Washington and Beijing are forcing many companies to rethink their reliance on China. But China’s convenience and its vast and growing consumer market make it difficult for many businesses to abandon it entirely.
“We are seeing companies redirect investment, and it’s because of the uncertainty,” said Ker Gibbs, the president of the American Chamber of Commerce in Shanghai. “I don’t think it’s because they are abandoning the Chinese market.”
Anybody who has looked at the label to see where products are made knows China is central to what the world uses. Chinese factories make iPhones, iPads, video game consoles, auto parts, industrial magnets, plastics, chemicals used in manufacturing, and a host of other essentials that keep the world’s economic gears running.
China is the most efficient place to produce a wide variety of goods. It has built vast networks of smaller factories that supply essential components to large factories. It has a workforce of hundreds of millions of people who know how to staff an assembly line. It has fast trains, smooth highways, and efficient ports that dependably move goods from the factory floor to the world.
China already makes a quarter of the world’s manufactured goods. That can’t be replaced anytime soon.
Efficient factories aren’t China’s only draw. Although the Chinese economy — the second-largest after the United States — has begun to slow, its consumer market is growing. By some estimates, there are more middle-class consumers in China than people in the United States.
China’s growing consumer class accounts for a huge proportion of global sales of iPhones, Nike shoes, and Starbucks lattes. It buys Chevrolets and Fords, though they are largely made in China. Its increasingly adventurous tourists create demand for Boeing planes. Increasingly affluent Chinese consumers have a taste for American steak, and they want more pork from pigs that eat American soybeans.
Factories are already leaving China, as Washington and Beijing impose higher tariffs on each other’s products.
But Trump’s latest threats have further alarmed American business leaders that changes in trans-Pacific trade relations are moving faster than they can adapt.
“Business is pretty numb about all of this,” said Rufus Yerxa, the president of the National Foreign Trade Council, a Washington-based business group. “They’re in shock about how badly this has all started to go.”
However, the process is slow and difficult. Companies such as GoPro and Hasbro have openly discussed setting up shop elsewhere. Others have sharply cut back operations as the Chinese economy has slowed. Ford, for example, has seen its car sales in China wither and has responded by laying off contract workers.
Still, relations between China and the United States may improve someday, perhaps after Trump leaves office. If that happens, companies that have moved their supply chains could find themselves at a competitive disadvantage compared with those that have stayed in China.
For all of Trump’s talk of bringing manufacturing jobs back to the United States, that isn’t likely to happen. Low unemployment has made it hard for companies to find factory workers in the United States. And, the United States also cannot match China’s ability to make the small parts that power the Chinese manufacturing machine.