Missing the Boat

Why the U.S. approach to trade with China must change

WThe author is vice president of China/

Asia Pacific strategy and global digital practices at consulting firm Tompkins International hat do all these products have in common: phones, healthy juices, lipsticks, soybeans, vitamins, king crabs, vintage sneakers and BMWS?

They are all produced in the United States and are being consumed on a massive scale in China. But their popularity, sales and consumption are all now being threatened by the ever-increasing number of tariffs placed on U.S. goods by China in response to tariffs placed on Chinese exports to the United States.

There are likely to be two major unintended consequences of a U.S. trade war on China. First, companies’ loss of access and sales to Chinese consumers at a time when they are consuming more Western goods (and everything else) than ever before. And second, the effect one tariff on one product can have on a range of U.S. industries.

It is no coincidence that as global trade has expanded over the last one and half centuries, especially in the last 50 years, prosperity has risen and poverty has receded in almost every part of the world.

The idea being propagated by some in Washington these days—that trade is a zero-sum game with winners and losers and that free trade hurts the U.S. economy—is demonstrably false.

In a trade war with no winners, China will also feel its fair share of pain and suffering in the short term. The effect on some Chinese workers, farmers, businesses and exporters is real and bottom lines will be hurt.

But we are not going to examine the bigger global implications of tariffs and the trade war or the potential downsides in China, but rather we are going to analyze the potential lost opportunities for U.S. companies in China and the effects that the tariff war is already having on U.S. workers and farmers.

There has never been a better time for U.S. companies and brands to be engaging Chinese consumers and businesses. The current trade war could not come at a worse time. The situation threatens to derail decades of increasing sales of U.S. goods to China and may permanently damage the future appeal of “Made in USA” in the market.

China’s consumer economy

Trade wars have no winners. The U.s.-china dispute is a problem unto itself, but the trade war is now growing into a global issue that could portend a complete realignment of global trade and the institutions that support it. And it will not be for the better for the United States.

The numbers are staggering to those not familiar (and still to those of us familiar) with China’s evolution from factory of the world to consumer market of the world.

China’s middle class is now more than 350-million strong and expected to be 550 million in less than 10 years. There are more than 650 million online shoppers— more than double the U.S. population— and more than 700 million Chinese with the disposable income to support a consumer economy.

Urbanization and continued economic progress mean that it is likely there will be 1 billion consumers with significant disposable income and close to 900 million digital shoppers in 10 years or less.

Driven by the evolution of digital commerce, smart mobile device ubiquity and a rapidly developing New Retail landscape, China’s super consumers are pushing growth and profits for U.S. and other foreign brands and are resetting the way the world thinks about selling, buying and experiencing retail.

New Retail was born in China and is now going global. The integration of onlineoffline logistics and technology as created

Seventy-three percent of surveyed U.S. businesses posted profits in China in 2017, with 74 percent of them planning to increase their investment in China, the highest proportion in recent years