Cool, confident and assured President Trump much like those card-sharks of old, is holding a winning hand. By outmaneuvering, out bluffing and using the power of U.S. tariffs as a powerful strategic bargaining chip, he is finally getting the attention of the stubborn Chinese Government.
The war of economic attrition is finally reaching critical mass as reported on Wednesday by The Nikkei Asian Review. American companies like HP, Dell, and Microsoft are joining Amazon, Google, Apple, and other tech giants moving their production out of China.
Major companies regardless of the industry are fleeing the country because of the President’s harsh imposition of tariffs, insisting that Beijing stop their decades-old unfair trade practices and their blatant campaign of stealing America’s intellectual properties.
Tech companies like HP and Dell ranked respectively worldwide number 1 and number 3 within the personal computer field, make up over 40% of the global market, are planning to reallocate up to 30% of their notebook production out of China. Likewise Microsoft, Google, Amazon, Sony, and Nintendo are also looking at moving some of their production out of the country.
Li & Fung Ltd, designs and transports products for stores like Walmart, Kohl’s and Nike, are also planning as quickly as possible to move out of China.
Spencer Fung the CEO of Li & Fung Ltd, acknowledged in a recent interview with Bloomberg, “U.S. clients are definitely very, very worried. Everyone is making razor-thin margins already and most people have a huge percentage in China. So if the biggest source increases the price by 25%, they are worried.”
In June just before the 2019 G-20 Summit, the President once again warned Chinese President Xi Jinping that he would once again raise tariffs on $300 billion worth of Chinese imports and duties of up to 25% on remaining untaxed Chinese goods if there was no fair trade deal.
The President had already raised tariffs on about $200 billion dollars on Chinese goods, plus raising duties from 10% to 25% in May. Beijing in-turn retaliated by raising its tariffs on $60 billion worth of U.S. goods.
However because of the President’s strong economic policies instituted at the beginning of his presidency, lowering taxes across the board and cutting intrusive regulations on businesses. The impact of China’s tariffs on the overall U.S. economy is negligible. Although there are pockets especially within the agricultural industry that are being impacted, still overall the American economy is humming along, perhaps the best in over half a century and beyond.
Fung laments that the trade war has significantly impacted factory production in China because of a lack of investments.
“Nobody’s investing, nobody’s buying. The trade war is causing people to stop investment because they don’t know where to put the money,” Fung said. “Many people put the money into Vietnam with one tweet.”
Adding “Vietnam, for example, is full, completely full,” Fung explained in reference to American retailers’ complete takeover of the country’s manufacturing capacity. “There’s no extra capacity for the U.S. companies to get in.”
According to Bloomberg giant companies like Amazon and Apple are reviewing their global supply chains, leaving China with just about 59% of the overall market in 2015, which if predications are correct will likely fall to less than half that number this year alone.
In the near future, China will see more factory shutdowns, with approximately a 2% decline in Chinese exports and a 4.5% decline in Chinese imports since the same time last year.
Cool, confident and assured President Trump is steering the economy in the right direction, despite the hand wringing from career politicians in Washington, who would have bailed out months ago, because they lack the backbone and the business instinct of someone who understands “The Art of the Deal.”