China/US Trade War Impacting EU Businesses?

USA Today is citing doom and gloom statistics as a direct result of the US-China trade war:   “China tariffs could force ‘widespread store closures’ and put $40 billion in sales at risk”.   “UBS claims that 12,000 stores are at risk. A record 8,139 stores closed in 2017, and another 5,864 in 2018”!

And The Sky Is Falling….

I imagine the numbers are absolutely correct, it is the reasoning that is ridiculously skewed. Clothing stores have been particularly at risk for a number of years now given that more and more people shop online.   Many offer free shipping, and some free returns.   This phenomena has caused retail outlets to shutter and the trend is likely to continue with or without China tariffs.

So why would USA Today create a false narrative?

The article is written by Kelly Tyko a self described ‘Bargainista’ who typically writes about where to find the best deals. Really. Need I say more.   It is blatantly inaccurate, and shows a hideous lack of economic insight, while bludgeoning the reputation of USA Today.

In fact, UBS has stated that adjustments to portfolios need not be radical but prudent as they are convinced a deal will be made.

Equally flagrant in promoting an anti-Trump/anti-US posit is Germany’s Deutsche Welle: “One Third of EU Firms Hit Hard By US/China Trade War”.   Cited by the European Union Chamber of Commerce In China.

Established in 2000, this European Chamber is an NGO representing 1600 companies within the EU doing business in China. Their Secretary General, Adam Dunnett, provided a much more interesting and pragmatic perspective on China and doing business in China:

The purpose of the NGO is to create a better market access and business environment with China overall.   According to Dunnett, European investment in China has been steadily decreasing for the past four years. Reforms within the Chinese economy have occurred most recently in the past two years, but the EU companies say it is likely too little, too late, and the positive impact on their businesses has been negligible.   When asked if the reforms instituted by Xi Jinping had encouraged them to invest more in China, the overwhelming response was – No.   EU businesses were already tilting away given that China’s closed door policies caused delays, shred profits, and left a bitter taste.   As such, 5% of businesses simply left for the more lucrative markets in Australia, Vietnam and Singapore.

When asked about the US/China trade war, Dunnett was quite straightforward and rational:   While the impact has affected 50% of the EU businesses, he also stated that, “The frustrations felt by the US, related to reciprocity, IPR infringements, and technology transfer obligations, are by no means new issues – the European Chamber has been raising them consistently for the last 15 years.”

Dunnett goes on to discuss problematics in China’s pharmaceutical policies that have inherent negative consequences on EU businesses – irrespective of the US trade war.

In essence, he appears to quite understand the US position, and recognizes that it is a necessity in order to officiate fair trade in the future.   He sees the current market environment in China as hopeful, but restrains promotion given it remains too restrictive in the present.  As such, he supports moving businesses to more free economies.

Will the trade war impact US businesses? Likely. But the mess that created such a massive trade imbalance ricocheted like crazy rising 400% between 2004 and 2018. TO do nothing would be reprehensible!

Ultimately, as Romney pointed out when he deigned to be President, China is buying our country, and owns our debt.  This is accomplished through trade imbalances.   If that is a good thing – then move to China. Unfortunately, Romney proved to be a false Republican, a McCainer surrounded by Swamp reptiles.  Still, he was correct with regard to China.

At least Adam Dunnett speaks from sensibility and reality. Hopefully, USA Today and Deutsche Welle will hire actual journalists to report on the global economics, instead of Bargainistas and Soros plebes.

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