International Trade and Global Business

 

Even in a Trade War, Opportunities Abound

Non-US and non-Chinese companies can fatten order books by positioning themselves as suppliers to both markets. Rather than ending up as the grass under two fighting elephants, such companies, if you’re one of them, can enjoy improved access because both want to be your friends and customers.
 
China and the US both have a need to create spheres of influence during the current spat and what might be a longer-term estrangement between the economic political heavyweights. The US just concluded a new version of NAFTA and the agreement allows an aggrieved party, i.e., the US, to walk away if one or more countries get too friendly with a country outside the pact, i.e., China. The US is working on an agreement with the EU, is ready to embrace the UK when it leaves the EU and is chatting with Japan. Others are sure to follow. This is the stated approach of the current administration—to do bilateral agreements with countries in which it intends to get better deals than any negotiated in the past.
 
China is increasing investment in the EU, particularly with those members in the east such as Czechoslovakia. The Belt and Road initiative has brought a Chinese freight rail line into to the heart of Europe—part of billions being spent to link China with markets via advanced infrastructure. That seems like a good thing as long as the trade flows are two way.
 
Taking a gamble
 
The US is trying to counter these moves, especially in North Asia, but doing so on the cheap, at least thus far. In Nepal, for example, the US is ponying up hundreds of millions for infrastructure, while China builds casinos there. Belt, Road and Jackpot? Gambling seems like an extractive industry that may help the investor more than the host. Nepali officials seem nevertheless to be enjoying the attention.
 
China is reportedly considering reducing tariffs and providing other inducements to exporters from countries other than the US with which it’s involved in a tit for tat trade war. Check your country’s status to see what opportunities exist, especially for consumer goods.
 
As far as China’s plans to become less dependent on foreign goods, but its leaders can’t expect to sell to everyone and not buy from anyone.  The whole point of trade is to produce mutual benefit for nations and to make consumers happy everywhere. A descent into deeper mercantilism will hurt China badly.  Already the US sanctions are biting. Corporate debt is already unsustainable, and inflationary warning lights are blinking. The lights are on late in Beijing, as Party leaders worry that The President of the United States will patch things up with the EU, presenting a possible united front against China’s predatory trade practices and regional saber rattling.
 
The response for now is threats of worse to come.  But at some point, perhaps as early as next year, China may announce a further round of reforms, opening its economy more and making it easier for foreign companies to do business there.
 
WebPort Global continues to build alliances, including with Chinese trade groups who are more interested in business opportunities than geopolitics. So, stay tuned for more developments and more opportunities. 
 
 

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