Businesses expect long trade fight even after Trump

This article first appeared in The Edge Financial Daily, on August 21, 2018.
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LET’S not get too excited in response to talks about talks among officials from the US and China. Tussles over trade are likely to be the norm no matter who wins the mid-term elections or sits in the Oval Office.

That was the view of most people polled by Chan Chun Sing, Singapore’s trade minister, at an American Chamber of Commerce lunch last week. Chan asked for a show of hands on which scenario is most likely: trade tensions will dissipate after the November congressional elections, wane after “personalities” leave office, or continue indefinitely so that executives should brace for the long haul. The last received an overwhelming show of hands.

The vote was instructive because it’s indicative of a growing realisation, not just in Singapore, that there are long-term forces shaping the US-China trade war that go beyond simply Donald Trump. There are few votes in full-throated advocacy of trade even in places that, in theory, should be all for it.

At diners I visited in eastern Colorado and western Kansas this month, places rich in agriculture that stand to lose from trade conflict, most conversations were shaped by Fox News, to which TVs were tuned. In Limon, Colorado, complaints among men in tractor and camo caps at the Country Pride diner were about CNN, Democrats and how Barack Obama was allegedly trying to take credit for low unemployment and the stock market’s record high this year. (In reality, Obama has barely said a word since he left office.)

If ructions over trade are here to stay and barriers of one form or another are going to be a quasi-permanent feature of the commercial landscape, that raises a critical question: What are corporations doing about it? Global supply chains were built up layer upon layer over decades. If firms are to adjust to what may essentially be a new business model, they need to be giving serious consideration to this — like, yesterday — and informing shareholders, customers and employees. There’s very little sign this is happening.

Deborah Elms, executive director of the Asian Trade Center in Singapore, finds the silence deafening. Discussing the global landscape in her office after the minister’s speech, Elms says she can’t find any executive at any company of any size who can identify a plan or even who has it. Either they don’t have one, which runs counter to the idea that something has fundamentally changed, or they don’t want to make themselves a target by going public. No executive wants to be the one who invites the tweetstorm from the Oval Office.

Once you accept that something fundamental has changed, it’s not hard to imagine the day some companies just decide to spin off Asian operations into separate businesses. Whatever is going to be destined for the American market, just bring it on home, behind tariffs walls or other kinds of restrictions. Whatever is made or sold in Asia, keep that line for that region. Gradually, the centre of gravity may become the Asian business. Spending decisions and executives looking to get ahead will focus on that region while the American infrastructure businesses continues to deteriorate. Depending on what Asian country you are talking about, you have economic growth rates of about 5% or 6%. The US is moving along between 2% and 3%.

Once economic nationalism takes hold, Elms reminded me, everyone wants a piece of it. No industry wants to be the one left out in the cold. If observers in Singapore, a place built on trade, reckon that today’s scuffles are more than a passing fad, we need to pay attention. And keep foul-weather gear handy. — Bloomberg

Daniel Moss writes and edits articles on economics for Bloomberg Opinion. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.