What will be the impact of Biden’s Chinese policy on American luxury?
Key points to remember:
A study commissioned by the US-China Business Council points out that the trade war has cost up to 245,000 jobs in the United States.
The pandemic has created a K-shaped recovery, and several industries are still underperforming and still face uncertainties.
U.S. textile companies can expect lower profit margins for 2021.
The Biden administration has shown its willingness to resume talks with China. But despite his encouraging words, the “new” foreign policy appears to be the same that blamed China for America’s economic problems, botched COVID-19 response, and even its loss of soft power in the developing world. On trade negotiations, US Trade Representative Katherine Tai said: “Snatch” the tariffs from Trump on Chinese products could unintentionally harm the US economy. In fact, the Biden administration decided to ignore the economic impact of tariffs.
A study carried out in 2019 by Moody’s Analytics showed how, in just over a year, the US-China trade war thwarted about 0.3% of the US economy’s real GDP and nearly 300,000 jobs. Bloomberg also presented a study of Brookings which place the cost of the country’s GDP in a range of 0.3 to 0.7% in 2019. study, commissioned by the US-China Business Council (USCBC), highlights how Trump’s trade war has cost the United States up to 245,000 jobs. And CNN reports that tariffs on “made in China” products have so far cost US importers more than $ 82 billion, according to United States Customs and Border Protection.
In the past, luxury goods and retailing have been strongly affected by these policies. Therefore, retail executives want to understand how Biden’s approach will affect their operations and margins.
The pandemic has created a K-shaped recovery, and several industries are still underperforming and still face uncertainties. Volatility and financial risks will continue even under President Biden, and U.S. textile companies can expect lower profit margins in 2021.
Additionally, Biden is weakening the economy and hurting American businesses by choosing to advance the trade war with China, leaving them more vulnerable to hostile takeovers. In the past, we have seen the economic power of Chinese companies and their interest in Western luxury and retail companies. As such, we expect Chinese companies to take advantage of the current economic situation.
At this point, even American “patriots” who believe in the resilience and exceptionalism of domestic businesses must recognize that China’s post-pandemic economy has rebounded faster than that of the United States.
Additionally, luxury consumption is booming in China, while the retail sector has been one of the hardest hit in the United States. The pandemic even sank iconic retailers like Neiman Marcus. Under these circumstances, American companies are more dependent on China than the other way around.
“How long before Baidu buys Google?” Or Tencent takes a 20% stake in Twitter? ” asks Kenneth Rapoza, Principal contributor Forbes.
China may not respect Washington’s reading book, but America’s behavior isn’t faultless either. Instead of kissing “extreme competition”With China and by investing in research and development (R&D), education and advanced technologies, R&D outsourced to the United States, promoted “nationalism” and the absurd cultural wars, and lost its innovation advantage. Washington has also tried to put the blame on China, playing a game of chance instead of accepting responsibility for its failures.
Nonetheless, the United States made a serious miscalculation in predicting that China would react like a crumbling Soviet Union. Instead of being bullied and pulling out of the conflict, China has retaliated with its own tariffs, boycotts, a blacklist of US companies, bans and new regulations.
And American businesses have been hit the hardest. They lost business opportunities, their profits declined, and their hard-working American employees lost jobs.
Given the circumstances, it is obvious that Washington’s bipartisan bill to counter China’s influence in the world will backfire. And American companies will pay the highest price.
It is remarkably naive to believe that global companies will jump at the opportunity to leave China just because the government allocates funds ”.$ 15 million to help US businesses exit Chinese market, diversify their supply chains and identify alternative markets. “
Despite Washington’s efforts, foreign direct investment in China continues to grow. In total, “10,263 new foreign-invested companies were established in China in the first three months of the year,” according to the Morning Message from South China. In addition, FDI (excluding financial sectors such as banking, securities and insurance) increased 43.8% in the January-March period, year-on-year. The increase was the highest quarterly growth rate since the second quarter of 2008, according to data from the Department of Commerce.
Foreign companies want to enter the lucrative Chinese market, not the other way around. Even companies like Nike Inc. and Lululemon Athletica Inc., which has transferred part of its production to Vietnam, is reconsidering its approach and is teaming up with local manufacturers. But this is hardly surprising when you consider that China’s textile industry is the largest in the world. Without forgetting, the country dominates the cotton market.
This position gives Beijing immense power, as it can disrupt the supply chain and create significant disruption for global retail businesses. Clearly, the luxury industry is not immune to these threats.
Despite its association with “Made in Italy” and “Made in France”, luxury depends heavily on China. Exquisite fabrics such as silk, fine pile yarns and wool, which are essential for luxury clothing, are produced in China. If Beijing enacts export restrictions or tightens export controls, the luxury industry will suffer.
At this point, the United States should stop decrying the rise of a strong competitor and work to become an innovative leader again. The United States is no longer the de facto leader of the world, but that doesn’t mean that the US-China economic race cannot produce a stable and innovative bipolar era.