Tennis balls and Donald Trump
CEO of US based company that makes tennis balls explains how President Donald Trump's tariffs on China in trade war hurt his company - and help his direct Chinese competitor ■ Meanwhile, Beijing encourages foreign investors and flows money into the economy.
The US Open has brought many moments of tension and excitement. Many Americans are probably disappointed that their country's tennis giant, Serena Williams, lost in the finale to Canadian Bianca Andresco.
For Eohan Eliasch, the chairman and executive officer of Head - a sporting goods group. that also manufacture tennis balls, every ball that was hit and belonged to Wilson, his main competitor and the sole supplier for the tournament of tennis balls - was like hitting into his flesh.
Paradoxically Head-pen needs to pay any US costum duties, while their Chinese competitor - is not required to pay for bringing their product to the US.
In an opinion piece that Eliasch wrote he describes in details how the trade war that president Donald Trump is having with the China, is hurting US Based corporates while benifiting their chinese corporate competitors.
Eliasch wrote at the end of his article that he supports Donald Trump's demand that US companies would stop manufacture good in China, but also stated that there is a need to exemp the US manufacturing companies from export custums for those who want to deliver their goods to china, while they need to transfer their operation from china to the US.
S&P 500 comparison to shanghai's stock exchange
It could be argued that the US-China trade war is hurting global growth, bringing manufacturing economies like Germany, Taiwan and South Korea to a sharp slowdown and recession, triggering a host of warnings from economists, major banks and economic institutions such as the IMF. The latter shows that American exports are more hurt than Chinese exports - the Chinese imposed penalties on US agricultural goods, for example.
China is set to announce measures to ease the effects of the trade war, according to a tweet yesterday by Global Times editor Hu Shijin. He said the measures would have a positive impact on both American and Chinese companies. The trade war has been severely escalated in the past month, with the United States announcing an increase in the tariff on Chinese goods and the volume of goods being dissolved.
Representatives from US and China are expected to meet again in the coming months and resume negotiations for a trade agreement, but the difficult shake-up of talks so far and the escalation in rhetoric and measures have jeopardized their chances of success.
Bleak outlook for American companies in China
The US Chamber of Commerce, which is the largest and most powerful business lobby in the US, published a dismal outlook for US companies operating in China. In the Shanghai Bureau's annual survey, most bureau-affiliated companies said that their revenue growth in 2018 was down. The optimism index for the next five years dropped, for the first time in 2015 - a year when China's stock markets plunged.
"Without signs of a trade agreement, 2019 will be a tough year; without a trade agreement, 2020 will be worse," the report said. Twenty-five percent of survey participants said they had transferred investments from China to other countries - compared to 18 percent in a survey a year ago. The main target was other Southeast Asian countries, followed by India (one of the South Asian countries). Mostly, businesses in technology, hardware, software and services fled.
A gift to foreigners on the 70th anniversary of the Communist Party
All of this puts heavy pressure on the Chinese economy. Foreign companies plan to reduce their activities and investments there. Many American companies cut employment in China in 2019, and their managers are generally worried about the slowdown in China's economy.
On the one hand, China is actually enjoying success: Shanghai's stock market index has risen 9% over the past month and has been among the best stock markets in the world. The S&P 500 rose 2% in the past month. China is removing obstacles and restrictions on foreign investment in its stocks and bonds - what Bloomberg called a "surprising gift" in preparing for the 70th anniversary of the Communist Party's birth.
Investors are flocking to China, although domestic currency has been receding 6% since mid-April. Foreign investors injected $ 3.9 billion net into the Chinese stock market last week - the high amount for eight months. Another source of optimism was the Central Bank's announcement on Friday that it was injecting liquidity into China.
Which is screwing up American manufacturers
While Chinese companies have the local government on their side, in the case of American companies, as the CEO of the headline describes in his article, there are conflicting interests between those of the government and those of the business sector. Just a week ago, President Trump blamed the US business sector for its difficulties . According to him, "poorly managed companies" are running out of their weakness in its lids.
The headquarters dominates half of the US tennis balls market. The company was founded in Pennsylvania in 1910 and currently manufactures in China. According to Eliash, the factory in China is one of the few in the world capable of generating the huge needs of the US market, where 18 million people play tennis Since production is made in China, Headstone is forced to pay 15% of the duty on the pills it sells in the US.
But competitor Wilson, controlled by a Chinese investment group, doesn't have to pay customs, because it produces the balls in Thailand. Eliash is ready to move his factory from China, but such a move will take five years. The result: The CEO has had to raise the price of pills in the US and lose market share to Chinese Wilson. Alternatively, he said, he could absorb the lids himself, but would then be forced to cut U.S. jobs and investment in research and development.
"These distortions look to me like the opposite of what the president is trying to achieve," Eliash wrote. He adds that Wilson's Chinese consortium invests in Chinese technology companies such as Tencent, which are developing artificial intelligence and areas in which the United States is desperate to hold its lead across China.
Many American businesses suffer similarly to headaches. "When President Trump aims to hurt production in China, he runs the risk of hurting American businesses and giving a significant advantage to Chinese companies manufacturing outside of China.
