13 Feb 2017

Latest Trump Trade Warning from Disney

US businesses are hoping to influence President Donald Trump’s trade policies, urging him not to make good on his campaign threat to start a trade war with China. Walt Disney CEO Bob Iger said that the effects would ‘be damaging to Disney’s business and to business in general.’ The company increasingly relies on China for movie sales and product manufacturing and the comment came as Disney reported a fall in sales. Disney’s third quarter sales fell to $14.8bn (£11.8bn), unexpectedly, but the firm is seeing a successful launch in China’s Disneyland Shanghai.

The first theme park in mainland China has been hailed by the company as one of its “biggest success stories in 2016.” With more than 7 million visitors since Disneyland Shanghai opened last June, Disney is firmly opposed to the protectionist policies Trump promised during his campaign for the US presidency. Will President Trump make good on his threat to impose a 45% tariff on Chinese imports? If so, wouldn’t the high prices of those goods hurt American family budgets as much as they’d punish Chinese manufacturers?

Trade stops, war starts

Never mind Trump’s threat of a trade war, the CEO of Chinese e-commerce giant Alibaba has upped the rhetoric, hitting back at Trump by suggesting a war of more than currency or trade. Jack Ma didn’t mince his words: “If trade stops, war starts” he warned. He spoke at Alibaba’s launch of its headquarters for Australian and New Zealand operations. Prior to Trump’s inauguration, Ma met with Trump and tweeted afterwards that he and Trump spoke of a plan to add a million US jobs by allowing small and medium-sized firms access to the Chinese market via Alibaba’s platforms.

Goldman Sachs sees risk rising

Goldman Sachs analysts don’t believe the US president will back down from imposing restrictions on Chinese imports like steel and machinery. They see the risk of a trade war between China and the US escalating quickly. In a strong message to their clients, Goldman Sachs said they see Trump’s administration will likely “make an announcement on China’s currency policy and impose unilateral tariffs on a number of products”.
On Sunday, February 12, in what was seen as a test of his administration, North Korea performed a surprise missile test. President Trump was surprisingly subdued in his response, saying that the US would ‘stand behind’ Japan as a military protector in the region. He’d just had a ‘cordial’ first contact with Chinese President Xi Jinping, agreeing to support the ‘One China’ policy after having been highly confrontational towards China. The US’s reaction to the North Korean is likely to be a sticking point between the world’s 2 biggest economies, with the US asking China to punish North Korea, it’s trading partner, with economic sanctions. Already trade limits between the countries have dropped by 5% from last year’s as imports from North Korea fell to $227 million. Historically the Chinese and North Korean governments have been allied, but the relations have become increasingly strained, increasing the risk of more than just a trade war.
US vs China: War Games

There’s understandable nervousness about Trump’s policy plans in China because Stephen Bannon, Trump’s highly influential chief strategist has-only months ago-predicted the US is ‘going to war in the South China Sea.’ Bannon’s treading heavily on territory the US has tiptoed across: the disputed islands China’s claimed which it has heavily fortified and would defend with a military strike if the US interfered. The US secretary of State, Rex Tillerson has said the US would block China’s access to the 7 islands, which China says risks a ‘large-scale war’.
Chinese officials see the outbreak of war as a palpable possibility, posting, on the day that Trump was inaugurated that ‘war breaking out tonight’ was not just a slogan. A third Trump official, Peter Navarro, head of the newly created national trade council, has also criticised China’s South China Sea ambitions, noting ‘very limited American response.’ President Trump said, in December, that China was ‘building a massive fortress in the middle of the South China Sea’. It remains to be seen whether the US will be kicking sand, spoiling for a fight with China over turf or trade, but one thing is certain: a clash between these global Titans would throw the world into chaos.