Axios China: "This Last Week May Rank Among The Worst Few Days In U.S.-China Relations In Recent Memory"

JH
John Honovich
•Sep 29, 2018
IPVM

From a well-respected newsletter on China:

This last week may rank among the worst few days in U.S.-China relations in recent memory:

  • On Monday the latest round of reciprocal tariffs took effect and China rejected the U.S. invitation for trade talks in Washington.
  • In response to U.S. sanctions on a department in the People's Liberation Army and its head over Russian weapons purchases, China recalled its navy commander from his U.S. visit and postponed military talks scheduled for Sept. 25–27.
  • The U.S. approved a $300 million arms sale to Taiwan.
  • China denied a U.S. request for a Hong Kong port visit for the USS Wasp.
  • President Trump accused China of meddling in the upcoming U.S. election and said that he and Chinese President Xi Jinping may no longer be "friends."

My thought bubble: I can find no indications that the relationship is not going to experience even worse weeks going forward. As Axios' Jonathan Swan reported Sunday:

The Trump administration is planning to launch a major, "administration-wide," broadside against China, according to two sources briefed on the sensitive internal discussions. These sources, who weren't authorized to discuss the plans with the media, told me the effort is expected to launch in the next few weeks.

And if Trump thinks that he and Xi are no longer friends there could be a whole different level of deterioration in the U.S.-China relationship far beyond trade. They never were friends, but Trump believing they were seems to have provided some restraint on U.S. policies.

Note: the author of this newsletter Bill Bishop has been highly critical of Trump's trade tactics and tariffs, so this is not a pro-American take. It is important for industry people to understand the broader context of what is happening.

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JH
John Honovich
•Sep 29, 2018
IPVM

One other thing he mentions in his newsletter is:

few U.S. companies seem likely to move their manufacturing facilities out of China.

While I don't know the US at large, one thing was clear at ASIS / GSX: a lot of large surveillance companies are looking seriously to move their manufacturing outside of China; correspondingly, the Korean and Taiwanese manufacturers are flooded with new customers. For example, one Hikua OEM told me not only are they moving away from Hikua, they are moving their sourcing outside of China entirely.

How much of a trend this becomes depends on how long the US / China tension lasts. If it ends next month, I bet almost all of them resume China business as usual. However, if this goes into 2019, there are going to be a lot in this industry moving out of China. 

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UM
Undisclosed Manufacturer #1
•Oct 01, 2018

The business decision of where companies maintain there manufacturing facility has, and will always, revolve around costs. When the cost outweighs the benefits you will see a move from China as a manufacturer. Will that move be back tot he US instead of other countries. Well that depends on the trade agreements with the other countries. As long as it is cheaper to make something elsewhere and ship to the US, businesses will do it. While in the short term, we will experience some difficulties, in the long term it will benefit the US to fix the inequities in Trade between the US and the rest of the world. To think that it is OK to allow countries to maintain a massive advantage in trade based solely on the US taking it on the chin is an idea that has passed.

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