A War Of A Different Kind
A War Of A Different Kind
The US became one of China’s largest trade partners in 1986
The conflicts between America and China is nothing new, and to make the long story short, it is basically due to the East is rising, and we can see the West is jealous. Thus, a war of a different kind emerged.
The trade war started in 2018 when America imposed tariffs on Chinese goods by claiming that China is being unfair for limiting American exports. China is undoubtedly a big market with a population of around 1.404 billion, and such limitation to American exports is a big disadvantage to the American.
Plus, America claims China is stealing their intellectual property to develop their products by illegally using, improving, and copying technologies from the West.
China gradually claims that they had improvised the intellectual property right (IPR) protection, but was fully ignored by America. And so, the war of a different kind goes on with both parties imposing and threatening to impose tariffs on each other.
What Tariffs Were In Place So Far?
The tariffs cost billions of dollars a year
By 2018, America started reviewing trade from China and decide on imposing three types of tariffs on approximately $250 billion Chinese products. In return, China imposes tariffs on $110 billion worth of American products.
The starting point of declaring the war of a different kind came from China, when they publicly announce that such action from America is an act of starting the largest trade war in economic history, according to a report from BBC.
They did try to talk out the war and making up to each other, but to no avail, America ends up threatening China with more tariffs.
However, China made surprising growth in its export sector in July 2019. While still wrapped in the trade war, since President Donald Trump imposed the tariffs on Chinese goods.
How Brands Are Affected?
How is the largest trade war is affecting overall brands?
The abundance of ‘Made in China’ products in the global market and becoming the number one choice of the world’s population including the Americans, due to its low price and compatible quality, would not last long.
The hike in the tariffs resulting in Chinese products being 25% more expensive for the Americans is hitting the corporations and big brands around the world because many of them are manufacturing their products in China.
This trade war between America and China eventually do not impact on themselves only, but many corporations and big brands are feeling the pinch.
For instance, according to Ana Nicolaci da Costa from a BBC Business News Report, car and motorbikes, food and drinks along with other industry that manufactures their products in China or uses the raw sources from the East were heavily impacted.
Generally, these industries were hit by the increase in the import duty and companies are trying to find a way out by either avoiding or doing less business with China.
Similarly, some Chinese products are using components and use technologies as well as design from America. In a way, we can see both sides were hit by the trade war and China did warn the world that things are not getting any better.
How Many Billions Are Lost So Far?
Many organizations are hit badly by the trade war
Both sides recorded annual loss for the year-end 2018 because the two countries were impacted by the tariffs.
In the East, the year 2018 recorded the worst annual earnings with 452 from 3,602 companies incurring annual losses, reported by South China Morning Post. According to the news portal, the net profit of companies listed on the Shanghai and Shenzhen stock exchanges were down by 1.7%.
Meanwhile, America claims that they were the one worst impacted by the tariffs imposed by China, with a loss of exports faced by the American exporters to reach an approximate amount of $40 billion as reported by FORTUNE.
With each side claiming their loses, the trade war goes on and persistently impacting the world economy in total.
170 Big Shoe Brands Warns Trump on the Trade War
Many shoe brands are affected by the tariffs
Escalating from the 25% tariffs imposed by America, big shoe brands including Adidas, Nike, Crocs, Skechers and Converse are now warning the President that the trade war is going to cause more loss to them. The tariffs are now causing the retail price of the shoes to hike, due to the increase in the cost of importing the shoes.
This would directly impact American consumers but Trump decision remain status quo and claims that his actions are what makes America winning the war.
According to The Washington Post, Trump proudly said in an interview that “We’re going to be collecting over $100 billion in tariffs,” clearly showing signs that he sees his actions as something that helps America to win the trade war.
However, the corporations are not seeing themselves as winning because most giant companies are having their goods manufactured from China. Although Trump’s action was putting pressure on these manufacturers to pull themselves out from China, The Washington Post mentioned in the same report that the shoe companies highlighted in their letter to the President that they can’t simply move factories to adjust to these changes.
How Huawei Is Doing With Their Backup Plan Since They Foresee This Is Happening?
Huawei has been targeted by the trade war
Photo credits to Huawei
Apart from the shoe industry, the tech sector is among the one being badly hit by the tariffs due to China’s ‘Made in China 2025’ plan, which America sees as a threat to their technologies development in the market.
Speaking of how the tech industry was affected by the tariffs, America particularly has its eye on Huawei. American Government grew suspicion towards the company for being a potential threat to the nation’s security.
A report by Bloomberg mentioned that Huawei failed to disclose the military background of its founder, a former People’s Liberation Army, which drew more suspicion.
And so America lay out their strategies to make things hard for Huawei by ruling out an executive order to include the tech company to the Commerce Department blacklist, which results in curbing American companies to sell components and equipment to Huawei.
According to the same report by Bloomberg, Qualcomm, Intel Corp., and Google stop their supply to Huawei immediately after the company got into the Commerce Department blacklist, causing a setback to Huawei’s production and a dent to their sales.
The situation escalated with the detaining of their Chief Financial Officer of Huawei in Canada on 1st December 2018. Huawei’s founder, Ren Zhengfei classifies this action as politically motivated, reported CNBC.
The latest and worst hit to Huawei was when Google revoke the Android license from Huawei, resulting in unavailability of Google Applications including Gmail and Play Store in Huawei smartphones.
Although Google assured the existing users of Huawei smartphones would not be affected, however, future customers of the China brand smartphone would not be able to enjoy any of Google’s services anymore.
Huawei saw this coming and was well prepared with their Plan B. This is using an in-house operating system from China’s National Intellectual Property Administration, as reported FORTUNE.
This operating system shall be similar to the Huawei smartphones used by consumers in China, but the market and world population doubted that the China giant tech company can develop an operating system compatible to Android, which to date dominated the smartphone market.
Nevertheless, Huawei told FORTUNE that their preferences shall always be Microsoft and Google, but the last resort shall be to use the Plan B which they presume to start by the first or second quarter of 2020.
Plan B is Always Important in Planning to Avoid Disaster
Having a Plan B is part of a risk management process
To conclude with the whole trade war issues, what we can learn from every party trapped in this conflict is to have a Plan B in all or strategies.
Stepping ahead of others, predicting what will happen and able to think further into the future is an advantage. This would help organizations in avoiding possible risks and disasters.
In business, such action is crucial and a Plan B is very an important strategy to ensure a smooth process, regardless of which industry you are in. However, for those who are in a competitive market, the risk will be higher.
