Discussing the trade tensions between the United States and Mainland China, “things are changing extremely fast,” Sarah Chin said at a Chamber roundtable on 13 September.

“I am no longer willing to place any bets as to how it might evolve,” she added.

Chin, who is Tax and Business Advisory Services Leader – Southern Region for Deloitte China, gave some background on how the situation had evolved and proposed some ways that companies can deal with the impact.

Chin showed a timeline of the moves that revealed the tit-for-tat nature of the tariffs. “It is very clear that every time there has been an action by the U.S., China has responded,” she said. “None were instigated by China; all were instigated by the U.S.”

Now that the tariffs have started to be implemented, Chin explained that there are ways that companies can reduce their exposure.

One is to look carefully at the supply chain. The tariffs only apply to products with a “Made in China” label – to qualify for this, 60% of components must be sourced in the country and “significant transformation” must take place in the manufacturing process. So companies can double-check whether a product really is “Made in China.”

They can also ensure that they have the right classification for their products, which may affect the tariff.

 Manufacturers that cannot avoid the Made in China label still have options. For example, anyone who manufacturers in the Mainland for export to the U.S. can use the First Sale for Export rule if using a middleman in Hong Kong, which reduces the amount of duty. “This is a beautiful system, and perfectly legal,” Chin said.

Price unbundling is another option. Manufacturers can strip out non-tangible elements, like warranty protection, so that the proportion of the value that is eligible for tariffs is reduced.

Although it is difficult to predict what will happen, the impact “is probably going to harm the U.S. a lot more than China,” Chin said. But the continued disruption will be bad for both countries and beyond, with the worst-case scenario being a global recession, she concluded.