US-China trade war: Consumers and businesses all over the world lose

Dollar takes breather as trade concerns linger, yuan remains in focus
Jul 04, 2018, 08.10 AM IST
TOKYO: Major currencies marked time on Wednesday while the Chinese yuan recovered from 11-month lows, after efforts by authorities the previous day to calm financial markets which had been rattled by worries about trade wars. Both the yuan and Chinese equity markets have been on edge ahead of July 6, when US tariffs on $34 billion worth of Chinese goods kick in. Beijing has said it would retaliate with tariffs on US products. The onshore yuan opened at 6.6365 per dollar … for more, go to 

US-China trade war: Consumers and businesses all over the world lose

KUALA LUMPUR (July 2018): In a trade war, everyone loses. There’s no winner. And consumers are the biggest losers.

Then, why is the President Donald Trump-led US dead set in perpetuating and fanning the US-China trade war?

The answer lies with the Americans.

The US-China trade war, being boosted by the trigger-happy “sanction and tariff slapping Trump” is not only causing misery to the American consumers and domestic economy, it is also rocking the global economic order.

Perhaps, the article below may help the rest of the world better understand the US-China trade war:

"America Inc and the rage against Beijing

Boohoo. Just how badly has US business been treated by China?

 Print edition | Business

Jun 28th 2018

ONE of the naughty secrets about America’s trade war with China is that it has the tacit support of much of America’s business establishment. For the past 20 years big firms’ default mode has been Sino-infatuation. Schumpeter attended a dinner in 2016 between the captains of USA Inc and Li Keqiang, China’s premier, and you could taste the deference in the air more keenly than the beef on the plates. But lately bosses’ mood has flipped into a hostility that risks becoming jingoistic and unhelpful.

While a few Sino-dependent companies such as Apple and Boeing want to lower the temperature, many others consider themselves mistreated by China; for them, it is payback time. This stance has two flaws. The sense of victimhood is over the top; American firms have done reasonably well in China. And it is stoking the White House to escalate a conflict that may spill over from trade tariffs into a war over investment by multinationals.

China may have been bad for steel workers in Cleveland but the calculation for companies is different. Globalised production has lowered labour costs. Since China’s entry into the World Trade Organisation in 2001, profit margins in America have been 22% above their 50-year trend. And companies engage not just in trade, but in cross-border investment too.

It is this investment that riles American firms. China originally promised to open up its vast market, bosses complain, but today it bars companies from some industries and forces them into joint ventures with partners that steal their intellectual property. Chinese firms get cheap state loans. The “Made in China 2025” plan envisions that foreign firms are excluded from new areas such as artificial intelligence. The overall result, bosses grumble, is that American firms are puny in China, making 4% of their global sales there. Champions such as Amazon and Goldman Sachs have either flopped or been largely excluded. Only perhaps a dozen companies make over $1bn of profits a year from China, including General Motors and a few tech-hardware stars.

Such complaints are valid, but the picture is lopsided. Most bosses love China’s state-run model when it involves them getting privileged access to its omnipotent leaders. Other big countries have infuriating investment curbs, both explicit and tacit, including India and France. The transfer of know-how from rich countries to poorer ones, by hook or crook, is an integral part of economic development. Firms often fail abroad—there is no God-given right to triumph. And few bosses bother to calibrate their China problem. They should ask themselves how big their business in China ought to be—or, what would “fair” look like?

Schumpeter has considered four measures of Chinese corporate unfairness, using data from Morgan Stanley and Bloomberg. The first is the weight of China in the foreign sales that American firms bring in. It stands at 15%; if it was in line with China’s share of world GDP, it would be 20%. This shortfall amounts to a small 1% of American firms’ global sales (both foreign and domestic). America Inc is similarly underweight in the rest of Asia, but there is much less fighting talk about South Korea or Japan.

The second test is whether there is parity in the commercial relationship. Firms based in China make sales to America almost exclusively through goods exports, which were worth $506bn last year. American companies make their sales to China both through exports and through their subsidiaries there, which together delivered about $450bn-500bn in revenue. Again, there is not much of a gap. American firms’ aggregate market share in China, of 6%, is almost double Chinese firms’ share in America, based on the sales of all listed firms.

The third yardstick is whether American firms underperform other multinationals and local firms. In some cases failure is not China-specific. Walmart has had a tough time in China, but has also struggled in Brazil and Britain. Uber sold out to a competitor in China, but has done the same in South-East Asia. American consumer and industrial blue chips are typically of a similar scale in China to their nearest rivals. Thus the sales of Boeing and Airbus, Nike and Adidas, and General Electric and Siemens are all broadly in line with each other. Where America has a comparative advantage—tech—it leads. Over half of USA Inc’s sales in China are from tech firms, led by Apple, Intel and Qualcomm. Overall, American firms outperform. For the top 50 that reveal data, sales in China have risen at a compound annual rate of 12% since 2012. That is higher than local firms (9%) and European ones (5%).

The final measure is whether American firms are shut out of some sectors. This is important as China shifts towards services and as the smartphone market, a goldmine, matures. The answer is clearly “yes”. Alphabet, Facebook and Netflix are nowhere, and Wall Street firms are all but excluded from the mainland. Chinese firms, however, can make a similar complaint. The market share of all foreign firms in Silicon Valley’s software and internet activities, and on Wall Street, is probably below 20%. America’s national-security rules, thickets of regulation, lobbying culture and political climate make it inconceivable that a Chinese firm could play a big role in the internet or in finance there.

The great wail about China

Far-sighted bosses know their stance on China must reflect a balanced assessment, not a delusional vision of globalisation in which anything less than a triumph is considered a travesty. But their voices are being drowned out. The shift of the business establishment to hawkishness on China has probably emboldened the White House and also led the Treasury and Department of Commerce to be more combative. Most big firms are blasé about tariffs; they can pass on the cost to clients. Few export lots to China. But soon China will run out of American imports to subject to retaliatory tariffs; in a tit-for-tar war, beating up American firms’ Chinese subsidiaries is a logical next step. USA Inc’s Sino-strop would then end up enabling the opposite of what it wants.

This article appeared in the Business section of the print edition under the headline "Raging against Beijing"
Why the US government sees China Mobile as a national security threat The application of China Mobile, the world’s largest wireless network operator by subscribers, to build its own telecoms network in the US was denied by the Trump administration
PUBLISHED : Wednesday, 04 July, 2018, 8:00am
UPDATED : Wednesday, 04 July, 2018, 3:33pm
Trade frictions between the United States and China may have escalated on Monday after a US government agency identified China Mobile, the world’s largest wireless network operator by subscribers, as a national security threat.The National Telecommunications and Information Administration (NTIA), an agency under the US Department of Commerce, said China Mobile posed a security risk in its recommendation that the Federal Communications Commission (FCC) deny the Hong Kong-listed network operator’s application to build its own infrastructure and provide consumer and corporate telecommunications services in the US. “After significant engagement with China Mobile, concerns about increased risks to US law enforcement and national security interests were unable to be resolved,” the NTIA said in a statement about the mainland firm’s 2011 application to the FCC. That represented the first time a Chinese telecommunications network operator had been singled out as a security threat in the US. American lawmakers had previously identified ZTE Corp and Huawei Technologies, two of the world’s biggest telecoms equipment manufacturers, as companies that posed risks to national security because of alleged ties to the Chinese government for more, go to