Executives in China worry about what comes next
Companies in the front line of the trade war between the United States and China are anxious about what comes next.
Executives at a World Economic Forum event in the northern Chinese city of Tianjin have been digesting the dramatic escalation in the conflict this week. Some appear relaxed, some worried, while others are hoping for the best.
The Trump administration launched its biggest barrage of tariffs against China early Tuesday. Within hours, Beijing said it would retaliate with more tariffs of its own.
“This round of tariffs is going to cause even more damage for US companies,” said William Zarit, chairman of the American Chamber of Commerce in China.
The head of Coca-Cola (KO) in China, Curtis Ferguson, isn’t fretting yet about the impact on his business. His supply chain is local, and he doesn’t expect Chinese consumers to stop buying Coke in the way they boycotted South Korean goods during a political spat between Beijing and Seoul last year.
“If that was a card for China, I think they would have played that one,” he said. The vast majority of Coca-Cola’s 50,000 strong workforce in the country are Chinese, and targeting the company could put jobs at risk, he added.
But Ferguson is also concerned about what may be around the corner.
“Business doesn’t like uncertainty. We’re for free trade,” Ferguson told CNN on the sidelines of the meeting in Tianjin. “I don’t know how bad things will get.”
While it’s running out of US imports to target with new tariffs, China could find other ways to make life difficult for global brands.
US companies operating in China have already reported increased hurdles, including delays at customs and more inspections by regulators, according to a recent survey by two American chambers of commerce based in the country.
‘Aggressive US sanctions’
Some businesses, such as Japanese drinks group Suntory, (STBFY) are already feeling the financial pinch.
CEO Takeshi Niinami said the trade war was an “immediate threat” to the company’s bottom line.
“We have huge investments in the United States where we produce bourbon that’s exported to other countries,” he said during a panel discussion on Wednesday.
The company now faces tariffs on its exports from the United States into China and the European Union.
“The whole global supply chain is getting hurt by aggressive US sanctions,” Niinami added.
Others are looking anxiously at what the dispute may mean for plans to enter the Chinese market, even if there’s little they can do to avoid being caught in the crossfire.
JPMorgan Chase (JPM) wants to take advantage of Beijing’s efforts to open up its financial industry and recently applied to launch a brokerage in the country.
Beyond ‘our control’
Asked if he was worried Beijing could withhold approval for the venture because of the trade war, JPMorgan China CEO Mark Leung said that it’s “not within our control.”
The bank is “working constructively” with regulators, and still hoped to get a license soon, he added.
Trade experts expect China to dig in for a war of attrition with the United States. A resolution could be a long way off.
“Eventually there will be a negotiated solution,” said Wendy Cutler, vice president of think tank the Asia Society Policy Institute.
That could involve China toning down parts of its industrial policy, which the US administration says facilitates the theft of intellectual property. “It’s going to require both sides to show flexibility,” Cutler added.
Coca-Cola’s Ferguson suggested a more novel way to fix the relationship.
“Trump seems to have figured out Twitter (TWTR), but I think he needs to get WeChat and get talking with President Xi,” he said, referring to Tencent’s (TCEHY) popular Chinese social networking app.
CNNMoney (Tianjin, China) First published September 19, 2018: 11:02 AM ET