03
May
2018

Could there be an upside to a China/US trade war?

The recent increase in trade tariffs applied by both the US and China to one anothers imports may at first seem pretty irrelevant to products in the luxury consumer sector as they were all related to steel, solar panels and agricultural products and on the face of it this is probably very true, but there could be a little bit of a sting in the tail in China should the government raise the stakes by making it an issue of national pride.

A passing glance at the Chinese people would probably cause the viewer to assume that they were calm and serine and not easily excited but in reality the populous can swing from black to white in a heartbeat if the right buttons are pressed, and the government knows which buttons these are. Some years ago we reported in Luxury Insights China about an issue that became very significant in China as a result of something the Japanese premier did that offended the Chinese government and then the people and resulted in Japanese cars and Japanese products being destroyed in public.

As with all these outbursts it lasted a week or two and then some other subject hit the news and it was forgotten, but it is not uncommon and is not directed at only countries but also brands. Apple who were the subject of a great deal of public anger after Tim Cook apologised for poor service in China after which the state media argued that foreign brands only wanted Chinese money and didn’t care about their customers. If the state wants to make something a big deal it has the mechanism to do so and an audience willing to listen.

What is important for any US supplier to China of any product to consider is that should the USA increase its trade pressure on China undoubtedly the country will push back with comparable tariffs, but should President Trump go to far, the state can very easily use people power to immediately reduce sales of American products in China and there would be nothing that Trade Department in Washington could do about it.

So why am I telling this story? The simple fact is that for the Chinese people in general it is very unlikely that they would look at the detail of a China/US trade war, to them its just a battle with the USA so anything American is to be reviled. This of course means that products from the States will be replaced by products from other countries, the Chinese people will still keep spending and hence this situation is a real opportunity for luxury and premium brands from the UK and other European countries to take up the slack and possibly replace their respective American competition for the foreseeable future.

The important issue here to remember is that in China you must be prepared for the unexpected.


Top