“The whole semiconductor industry could collapse.”
China is important to US companies. Qualcomm gets 57% of its revenues in China, Micron 43%, Apple 23%, Jabil 21%, Boeing 13%, Wynn Resorts 60%, according to Bloomberg’s math.
In the last earnings report, GM specifically pointed at its “strong performance in China,” the largest auto market in the world. In the first three quarters this year, GM sold 2.7 million vehicles in China, 38% of GM’s global sales, and up 9% year-over-year. GM’s global vehicle sales rose a mere 0.4%. Without the boom in China, GM’s total vehicle sales would have declined.
And much of the supply chain of US companies is at least partially dependent on China. US companies have long ago jumped on the China bandwagon. With growth languishing in the US, Europe, and Japan, China was the place to be – both, as a booming market for American brands and as a manufacturing base.
This is part of a complex two-way, awfully lopsided $627-billion trade relationship, with the US running a $337 billion trade deficit with China – for the great benefit of US companies and with, let’s say, mixed impact on the US economy. But it cuts both ways: one country’s exports are the other country’s supply chain.
President Elect Trump has now inserted himself into this relationship by questioning in bursts of 140 characters or so the previously unquestionable “One China” policy, whereby the US toes the line and acknowledges that Taiwan is not an independent country but part of China. This is a hot-button issue in China.
So when Trump “accepted” a phone call from Taiwan’s leader – the first direct communication between leaders of the US and Taiwan since 1979, and apparently planned by the Trump folks in advance to demonstrate a hard line on China – and when he in the ensuing media hoopla tweeted that the “One China” policy could be used as a bargaining chip, the Chinese leadership sat up straight. And it has begun to bargain in its own manner.
On Saturday, Wang Jianlin, chairman of Dalian Wanda Group – which acquired among other US jewels, AMC Theatres and Legendary Entertainment, and announced last month that it would acquire Dick Clark Productions – told a conference in Beijing that the jobs of his 20,000 employees in the US would be at risk if a trade war between the US and China broke out.
On Tuesday, an editorial in the Global Times, published by the state-run People’s Daily group, warned, as reported by Bloomberg: “To deal with Trump’s threats, China has a full toolbox.”
On Wednesday, the official China Daily, an English-language paper, cited Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau. China would soon hit a US automaker – he didn’t say which – with an
http://investmentwatchblog.com/trump-tweets-about-china-us-businesses-freak-out/
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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