Risks for U.S. Companies Doing Business in China: 2025 Outlook

The risk landscape for U.S. companies doing business in China is worsening

U.S.-China commercial relations are poised for additional strain from 2025 onwards in light of widespread expectations that the Trump administration will impose additional tariffs on China. Assessments that China will devalue the Yuan and impose retaliatory tariffs in response — in addition to pursuing a broader range of retaliatory measures — risk generating tit-for-tat sparring between Washington and Beijing that extends well beyond the scope of the tariffs themselves and durably harms commercial conditions for U.S. firms doing business in China.

Our survey data on key commercial aspects of the bilateral relationship — covering Chinese consumers’ views on tariffs, investment restrictions, and consumer boycotts — similarly paints a damning outlook of business risks on the horizon for U.S. companies doing business in China, whether via exports, direct investment, or supply chain routing.

This memo reviews our data on each of the above issues as well as the broader bilateral geopolitical climate and provides guidance for U.S. multinationals seeking to navigate resurgent headwinds. We recommend that U.S. multinationals with China exposure increase their estimates of future operational risk and incorporate it into their decisions on future Chinese investments versus the available alternatives.

1. Tariffs & trade barriers

Amid an anticipated escalation of the U.S.-China trade war (which began in 2018), the overwhelming majority of Chinese adults (77%) support keeping existing tariffs on the United States in place. A majority (74%) similarly support imposing additional tariffs, an issue on which we have surveyed on a non-continuous basis since early 2022.

In a nod to rising expectations of renewed bilateral tensions over the course of the 2024 U.S. presidential campaign, Chinese support for maintaining existing tariffs on U.S. products has increased by approximately 14 points over the last year, and by a more substantial 20 points relative to February 2022, when we began tracking Chinese sentiment on the issue. The trend has largely been driven by an increase in the share of Chinese adults who “strongly support” the tariffs.

Chinese support for imposing additional tariffs on imports from the United States is meanwhile up by approximately 27 points as of Dec. 2024 relative to our initial tracking of the issue in February 2022. (The latter survey question was not fielded in January 2024, precluding a comparison of the change over the past 12 months.)

We interpret the nontrivial uptick on both fronts as implying rising Chinese buy-in for in-kind retaliation, should the Trump administration move to impose additional tariffs on China post-Inauguration Day (our current expectation).

What’s more, while Chinese consumers are broadly supportive of tariffs on foreign goods in general, our data suggests they are even more supportive of tariffs on the United States specifically, in a nod to the particularly acute bilateral animosity between Beijing and Washington: Across much of a core set of demographics we examine, the share who “strongly support” tariffs is consistently larger when respondents are asked specifically about those targeting the United States.

At present, Chinese consumers’ views of existing tariffs on U.S. goods are driven first and foremost by their perceived impact on the Chinese economy, with a plurality citing the tariffs’ impact on that front as the primary factor affecting whether they support or oppose them. 

For U.S. companies with business interests in China hoping that the country’s recent economic malaise may have caused the public to reevaluate its support for the existing tariffs (and by extension, new ones), our data offers a pessimistic outlook: The overwhelming majority of Chinese adults think existing tariffs on the United States benefit the domestic economy, suggesting they may view them as a partial shot in the arm for the economy rather than as a contributing factor to the recent doldrums. By extension, we expect near-term public support for additional tariffs targeting U.S. goods to persist even if China’s economy continues to waver, and particularly if Beijing ultimately places Yuan devaluation on the table.

On the whole, these dynamics impart a bearish outlook for bilateral trade relations: We expect tit-for-tat tariffs and a hardening of Chinese views on tariffs targeting U.S. goods specifically to facilitate a worsening trade war, to the detriment of American companies with business interests in China.

2. Investment Restrictions

Our outlook on bilateral investment conditions — specifically those applying to U.S. companies with investments and supply chains in China — is similarly fraught. At present, roughly half of Chinese adults support selective bans on U.S. firms’ ability to conduct a variety of commercial operations in China that apply when Beijing deems national security is at stake, while roughly one-third support imposing outright bans regardless of the national security implications.

But recent history tells a more damaging story: The share of Chinese adults who support complete bans on U.S. firms’ ability to do business in China is just shy of a tracking high across all types of commercial activities we examine — covering doing business in China writ large, acquiring Chinese companies, and investing in Chinese companies — with support on all three fronts up markedly over the past year.

Given the incentives stemming from public opinion for the Chinese Communist Party to show resistance to perceived bullying, we anticipate an increase in related barriers to business operations targeting U.S. companies that are currently invested in China — such as raids and fines mirroring developments seen in 2023 — to follow in the coming months. For American companies investing in China, our data coupled with recent history suggests that the risk of new restrictions on freedom to operate is rising and should be incorporated into corporate scenario planning efforts. China’s large trade surplus will meanwhile pose de facto limits on the extent to which Beijing can use retaliatory tariffs to inflict economic pain on U.S. companies, suggesting it may attempt to dial up the pain in other areas, such as those mentioned above, making operational risks to firms that are already invested in China particularly acute. For U.S. firms that are considering making new or expanded investments in the Asia-Pacific region more broadly (particularly those related to supply chains), we similarly recommend upweighting potential alternative markets relative to China given this risk. 

3. Chinese consumer boycotts

For U.S. companies currently serving China’s vast consumer market, revenue diversification will necessarily pose challenges. But rising risk of consumer boycotts will exert renewed pressure on those that stay put: With few exceptions, at least a majority of Chinese consumers say they are likely to boycott a foreign company over the next 12 months. While our survey language asks about foreign companies generically (as opposed to U.S. companies specifically), especially strained relations between Beijing and Washington relative to those between other bilateral pairs suggests U.S. companies could be particularly exposed to pain on this front. Chinese adults’ belief that it is important to build up domestic champions who can develop products, brands and services that compete with foreign ones inside China — a view held by 67% of the population as of December 2024 — could meanwhile make it easier for boycotts to spiral or last longer when they do emerge.

Recent trends in boycott propensity paint a similarly dire outlook: The overall share of Chinese consumers who say they are willing to boycott foreign goods in the next 12 months — currently at 67% — is up roughly 29 points since January 2024, marking a 75% increase over that time period.

Per our Chinese Consumer Boycotts Tracker, companies that stay the course and ultimately face boycotts do have options to mitigate the pain, with the issuance of statements supporting or praising China the most likely to assuage consumers and convince them to end a boycott. But as president-elect Trump returns to Washington, doing so is likely to rankle the new administration back home, if not the American public, leaving companies between a rock and a hard place.

Though leaving China would undoubtedly cause many U.S. multinationals to sustain a substantial near-term revenue hit, companies should continue to pursue revenue diversification, priming alternative markets for expansion through strategic marketing campaigns and related efforts. At a minimum, scenario planning involving revenue projections for China should incorporate an elevated likelihood of boycotts, a risk we recommend upweighting over the near-to-medium term. 

4. General geopolitical outlook

Worsening Chinese sentiment on the value of unfettered bilateral investment and commerce comes amid a period of persistently strained relations between Washington and Beijing that president-elect Trump’s return to office is poised to aggravate further. In a nod to these broader geopolitical tensions, the share of Chinese adults who view the United States as an “enemy” is pinned near a tracking high: 36% of Chinese adults hold that view as of December 2024 (up 15 points since last January) bringing the overall share who view America as “unfriendly” or worse up to two-thirds of the adult population. 

The share of Chinese adults who think China would win a Cold War against the United States (62%) has meanwhile risen sharply and is up roughly 30 points relative to one year prior, in a potential nod to growing confidence in Beijing’s military capabilities and a renewed public embrace of bellicosity, or simply rising nationalism in the face of Trump’s return to office. Whatever the drivers, the trend suggests a potential hardening of Chinese attitudes toward the United States that risks impeding efforts to turn down the temperature.

Guidance for U.S. multinationals

How should U.S. companies with business interests in China position themselves for 2025 and beyond? As outlined above, the safest option is to make concerted efforts to reroute supply chains through other countries, while diversifying revenue bases by seeking out consumers in other markets. Both efforts will take time, and companies will likely see their business interests in China face hurdles in the meantime. We assess that the risk to corporates is growing, both from consumer boycotts and from de facto and de jure restrictions on freedom to operate — heightened risks which we highly recommend baking into scenario planning. For those singled out by Chinese consumers for boycotts, the safest option is to kowtow, while remaining cognizant of the risk of consumer and administration blowback at home.

If there is a silver lining in our data, it’s that on many fronts, Chinese animosity has softened slightly from November into December 2024, suggesting some degree of public willingness to judge the incoming Trump administration by its actions instead of just its rhetoric. But the improvement in sentiment is relatively muted overall, and for most data series we examine, support for trade- and investment-related restrictions and consumer action targeting U.S. firms remains sharply elevated.

With respect to tariffs specifically, we note one additional silver lining: A majority of Chinese adults think it’s at least “somewhat” important to resolve bilateral trade-related tensions between Washington and Beijing, with the shares indicating that such efforts are “somewhat” and “very” important increasing modestly in recent months. While tariffs — the frontline of sparring between both sides — may be valuable as a negotiating tool, neither country’s consumers ultimately gain from tariffs affecting the price of consumer goods. And with large shares of U.S. consumers expecting American companies to pass on the costs of any tariffs that do materialize (see our related research on the topic), companies will not benefit either. 

For companies that are inclined to nudge the incoming Trump administration on China policy in an attempt to secure commercial breathing room while they chart a future course, they could task their industry groups to convince the administration to tie securing their Chinese market access to concessions in future tariff negotiations. Recent history shows this can have mixed results. Beyond that, we see limited options for U.S. businesses with commercial ties to China to secure near-term improvements in bilateral business conditions, and any pullback from tariffs themselves remains a longshot given strong Republican buy-in for many of Trump’s most expansive tariff proposals.