Asia businesses brace for the unexpected
Trump vows to reshape trading relationship during tour
HONG KONG: Some businesses in Asia are bracing for the unexpected as President Donald Trump traverses the region and meets with the leaders of major US trading partners. Exporters are apprehensive, given Trump’s penchant for unpredictability, his vehement dislike for swollen US trade deficits, and his threats to rip up trade deals.
Trump began his tour in Japan, where he vowed to reshape the trading relationship, saying it’s “not fair and it’s not open.” He stopped in South Korea yesterday and will next travel to China, Vietnam and the Philippines, including stops at three regional summits. That allows him plenty of chances to showcase his assertive style and make off-the-cuff remarks that could leave his hosts and adversaries scrambling to react.
Trump’s tendency to make impromptu announcements and his frequent threats to punish trading partners have brought heightened uncertainty to overseas presidential visits that traditionally are meticulously choreographed, said Rick Helfenbein, president of the Washington-based American Apparel & Footwear Association trade group. “We have an unscripted president going into a scripted environment, so you never know what he’s going to do,” he said.
Trump may announce some big deals by US companies selling to China to help lower the trade deficit, said Jake Parker, vice-president of the USChina Business Council in Beijing, a group seeking fair access to China’s market. Or he might opt for a harder line, such as trade investigations that could invite retaliation. “Our companies are frankly concerned about the types of retaliation that would come along with a more assertive China strategy,” Parker said. There are fears any Chinese government retaliation “would be very visible, and would target high profile US brands that are operating in China.” “Our companies frankly don’t want to be caught in that kind of crossfire,” he said.
Export manufacturers already are on “high alert” over possible disruptions to their global supply chains because of stalled talks with Canada and Mexico on revising the North American Free Trade Agreement, Helfenbein said. Trump has blasted NAFTA as a job-killer and wants it revamped or else he may pull out. That’s left companies in North America looking for alternative manufacturing locations, Helfenbein said.
“Right now what looks stable to them is Asia,” Helfenbein said. “If Asia gets disrupted by this president’s trip then, oh my God. What are these companies going to do? Because that’s part of their strategic planning and strategic thinking.”
For some manufacturers, like Hong Kong LEDbulb maker Keyart Industries Ltd., there’s little to do but wait and see what happens. “It’s out of our control,” said General Manager Brian Lau. “We’re worried but there’s nothing we can do about it.” He said hopefully the “trade is going be there” no matter who is president.
Keyart’s joint venture plant in southern China’s factory heartland of Guangdong province exports to the US and Europe. For electronic and electrical goods makers, moving operations would be difficult because of China’s vast and intricate supplier network. “Americans don’t really make these lamps, so where are you going to buy them from?” Lau said. If the US slaps tariffs on Chinese-made goods, “the cost is ultimately going to be put back on customers.”
Bigger worries
Other manufactures shrugged off Trump’s threats, saying they have bigger concerns, such as brutal competition from local rivals. “What can he do about it? Business, it recognizes only profit,” said Shaun Cai of Ceeport Samaf, a Guangdong toilet maker that exports to the US, Australia, Southeast Asia and the Middle East. Exchange rates, specifically the dollar’s weakness against the Chinese yuan over the past year, are another headache. “When the rate comes down we get less (yuan from dollars) and we’re losing money,” Cai said.