The Chinese Trade War Begins—What CEOs Need To Know

The trade war between the U.S. and Chinese governments is in full swing, with tariffs on $34 billion in imported Chinese goods going into effect today, and China matching that number on a list goods imported from the U.S.

The long list of affected goods includes Chinese-made technology, aircraft tires, industrial parts and machinery, while China has put new tariffs on U.S. agricultural products such as pork and soybeans.

In recent weeks, CEOs have told Chief Executive that while a full-scale trade war isn’t ideal, they understand President Trump’s motivations behind the tariffs and hope it will lead to better trade agreements down the line.

“I view what [Trump] is doing as a round of negotiations where he’s attempting to dislodge 30 years plus of trade agreements and a status quo that has brought us to where we are today–which isn’t enviable,” Liberty Tabletop CEO Gregory Owens told Chief Executive.

“We’ve been taking a beating for bad trade deals, and we need some relief.” – Joe Korff

Joe Korff of Salem, Ohio-based iron castings company Korff Holdings described previous administrations “weak and uninformed” for tolerating trade imbalances perpetuated by NAFTA and other U.S. trade policies.

“We’ve been taking a beating for bad trade deals, and we need some relief,” Korff says, “This dumped product coming into the U.S. is killing local industry, destroying communities and creating societal problems [as a result of lost jobs and benefits]. The whole idea is, you want to sell it here? Make it here. There’s nothing wrong with that. You get muscle back in America.”

Snap-on CEO Nick Pinchuk told Chief Executive that while a trade war can cause uncertainty in the business world, U.S. manufacturers are always looking to improve the country’s position in international trade agreements.

“I am a member of the National Association of Manufacturers…and our view is trade is good. Free trade and balanced trade is good,” Pinchuk says. “We think there can be improvements in our trade positions versus partners, and I think I speak for all of the manufacturers in America like that.”

A CEO of a chemicals manufacturer in Missouri, who asked not to be identified, says that his company has been planning for the trade war in advance.  “Specific chemical imports from China have not yet been impacted but in anticipation/hedging we have greatly increased our inventories,” he says.

Overall, he support Trump’s plans: “The US has been getting the short end of the stick tariff wise for many years.  I see Trump trying to even the playing field somewhat (call it hardball or whatever).  Who knows how much time Trump has to even the score and, sure, there will be a little medicine to take.  I see the US getting stronger, not weaker.”

Here’s a look at what CEOs need to know about today’s tariff news:

• • • China’s official response to the U.S. tariffs being enacted says: “Such tariffs are typical trade bullying, and this action threatens global supply chains and value chains, stalls the global economic recovery, triggers global market turmoil, and will hurt more innocent multinational corporations, enterprises and ordinary consumers.”
    • What’s next? Businesses in the oil, plastics and chemicals industries are closely monitoring an additional $16 billion in proposed tariffs on Chinese-made energy, plastics and chemical products, as China has promised retaliatory tariffs on U.S.-made product.
    • The Federal Reserve Bank is hearing concerns from business leaders over the trade war, and are scaling back or postponing capital spendingas a result of uncertainty over trade policy.
    • The global impact of an all-out U.S./China trade war would be widespread, with countries like Luxembourg, Taiwan and the Slovak Republic taking the hardest hits.

Read more: Trump’s Trade Strategy Playing Well With Some Manufacturing CEOs