By Amy Lv, Florence Lo and Shubing Wang
GANZHOU, China (Reuters) -Chinese copper flat wire manufacturer Wellascent’s decision early last year to build a factory in Texas was a hedge against geopolitical risks. Now the investment is paying off as U.S. import tariffs boost demand for its locally produced goods.
The company’s plant in Grand Prairie will begin production later this year and expects to produce 3,000 metric tons of copper flat wire annually by 2028, serving clients such as automaker Stellantis, from behind the safety of Donald Trump’s tariff wall.
The factory shields U.S. customers from the 50% tariff imposed on copper wire imports, along with other semi-finished copper products like tubes, although refined copper – the base ingredient – is exempt from tariffs.
“A few prospective clients in the United States were hesitating about buying our products at the very beginning, as they were concerned Sino-U.S. trade tensions would make stable supply uncertain,” Hazel Zhu, a board member at Wellascent Electronic, told Reuters during a tour of their factory in mid-August.
“A factory in the U.S. means the copper tariffs have in turn become a golden opportunity for us,” she added.
Wellascent plans to invest in three years $100 million in the U.S. plant, which is expected to generate more than half of the company’s overseas revenue within three years.
Wellascent’s investment highlights a rare case where a Chinese company has benefited despite U.S. tariffs designed to counter China’s perceived industrial dominance. But while the investment achieves one of Washington’s stated aims of bringing industry to the United States, it underscores ambivalence among U.S. policymakers about whether to welcome Chinese companies.
Lawmakers proposed removing tax credits from a Ford electric battery plant because it plans to use technology from Chinese battery manufacturer CATL, although the carmaker said last month it believes it will still qualify.
In the solar industry, some domestic producers have voiced concerns that Chinese rivals setting up factories domestically benefit from subsidised supply chains in China.
Chinese investments, especially in manufacturing, began tapering off after Trump’s first term and have now stalled, according to Cameron Johnson, senior partner at consultancy Tidalwave Solutions. The hostile attitude in Washington is now echoed in Beijing where regulators are encouraging firms to avoid the U.S., he added.
“Anybody who is big and could be a target for U.S. or Chinese governments is doing hardly any investment,” Johnson said. “They (Wellascent) got lucky in many ways.”
Net stock of Chinese foreign direct investment in the U.S. fell by $8.1 billion between 2019 and 2023, U.S. data showed.
Wellascent’s Zhu said the company had no regulatory issues with its Texas investment, winning approval from Chinese and U.S. authorities.
Still, a temporary 145% tariff on equipment shipments to the U.S. in April nearly derailed its plans. Zhu said the trade truce reached in May allowed the firm to avoid a 60% cost increase and proceed with furnishing the plant.
“The sudden 145% tariff left us completely stunned, as it left us at a crossroad as for whether to reconsider the investment; luckily, additional tariffs were removed, allowing us to smoothly ship a second batch of equipment to the factory,” Zhu said.
Both sides extended that truce by another 90 days earlier this month to give negotiators more time to craft a deal that Trump says is not far off.
If a trade deal is reached, the example set by companies like Wellascent could become case studies for other Chinese firms looking to invest in the U.S., Johnson said.
“Their example was pretty unusual, but maybe, if the relationship gets a bit better, we might see more of it because there are test cases out there in the market.”
(Reporting by Amy Lv, Florence Lo and Shubing Wang in Ganzhou; Editing by Lewis Jackson and Jacqueline Wong)
Comments