Companies feel pinch from rising costs, entrepreneurs say Section 232 'kills us'

Margaret Wong, a businesswoman in Sacramento, California, has been forced to find an alternative country to manufacture her products, but with little luck.

"I'm not going to give up China," she said. "But Section 232 is really killing us."

Section 232 of the Trade Expansion Act of 1962 authorizes the US president to adjust imports of goods from other countries through tariffs. In 2018, former president Donald Trump imposed tariffs on steel and aluminum imports from China under Section 232. President Joe Biden keeps the tariffs in place.

"We just have to absorb it … the profit margins are down because of the tariffs," said Wong. "All the tariff costs are actually aided by consumers in the United States. Why is inflation so high? Because of the 25 percent import duty."

Wong shared her grievance at the annual conference of the Committee of 100 in San Jose, California, where industry insiders discussed how the US government's China policy affects trade and economics.

"Due to the rising costs, a lot of my clients are saying that we don't want to buy Chinese products. But no other place can replace China. We've been actively looking for 'Made in Mexico', but it was not as efficient as I expected," she said.

"The manufacturing infrastructure in China is so efficient. When you make a call, you get something — you get materials, you get engineers fast. But if you are in Vietnam, it takes forever to get something," she continued.

Wong founded McWong International, Inc in 1984 and since then she has created several companies in manufacturing, electronics and environmental engineering. She has also been engaged in cross-border investment between the US and China in the lighting industry.

She said the 38 years of doing business with China informs her that "global trade is a must in this world" and "we need to depend on global trade".

"A lot of my Chinese suppliers are actually investing in the United States — not just invest in money as a foreign direct investment — they want to produce 'Made in America' products," said Wong. "They are going to move the money, the talent and the resources."

She sees it as "a win-win situation". "We need to be able to make it economically justified, not to let politics interfere with the economic interests," said Wong.

Dwindling interest

However, Chinese investment into the US has dramatically declined in the past few years and interest from Chinese investors dwindled, said Catherine Pan, partner at Dorsey & Whitney LLP.

Citing her own experience at the recent Select USA, an event that aims to attract investors from around the world to invest in the US, Pan said the delegation from China was drastically reduced, compared with the size a few years ago.

Three US laws should be paid the most attention to — the Inflation Reduction Act, the CHIPS and Science Act and the Infrastructure Investment and Jobs Act — because they will be "the economic development engines for the next few decades", Pan said.

"These three acts all intentionally shut out Chinese investors," she said, "The CHIPS and Science Act is to protect the American semiconductor industry, especially supercomputers and chips fabrications. The Inflation Reduction Act has a foreign entity of concern provisions to make sure Chinese investors cannot participate in tax incentives or credits for EV, EV batteries and renewable energy industry."

"Given the current geopolitical tensions, the US-China foreign direct investment will probably continue to see a decline," she said.