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Should U.S. Companies Doing Business in China Be Worried?

July 5, 2017

*Reposted from

Video Transcript

Sandra Navidi - Beyond Global LLC: "U.S. companies need to be concerned because really the administration has not demonstrated a consistent thought through strategy. I think the players here have been pretty clear that China would not be on the U.S.'s side, that was clear from the beginning. But I think it has been clear to U.S. CEO's that Trump would be very unpredictable and it was clear earlier this year that CEO's were very concerned."

CNBC Spokeswoman: "Li, your group has a long history of trade between China and Iowa, so what direct impact have you seen thus far from the way the Trump administration is trying to handle the North Korea threat?"

Li Zhao - China Iowa Group: "Well, ever since the Trump administration took office, when we talked to our clients over in China there has been a little bit of a roller coaster ride. At first, people were really concerned about a possible trade war, and then after the Mar-A-Lago summit, things were looking very bright.  With the 100-day plan a lot of our clients were relieved and they are all talking about how the possible trade war seems unlikely. Understanding that there has been new development this week, but the census that when we talk to our clients in China, they felt like the Trump administration is setting the stage and wanting to enter into new rounds of negotiation. Maybe things are not progressing as fast as he would have liked, so they are patiently waiting and hoping that the two sides will sit down again and talk among themselves and figure out what's the best solution for both sides." 

CNBC Spokesman: "You know Sandra, even as the U.S. is looking to China for help on the North Korea situation, on the other hand, we have sanctioned one of their banks. There has been what the Chinese consider an encroachment on the South China Sea by U.S. vessels. What do you think President Xi is going to be telling President Trump when they arrive in Hamburg this week?"

Sandra Navidi - Beyond Global LLC: "Well one thing is for sure if Trump goes beyond the bluster and actually institutes concrete measures the Chinese will retaliate. And I would like to draw your attention to the fact that when Steve Bannon was still at Breitbart last year said that the likelihood of a war over the South China Sea was very likely. So the fact that there would be a possible escalation that has been on the table. I think the greatest concern is for U.S. companies who actually produce and sell within China. Retaliatory measures could be more subtle or they could be more drastic like price dumping and flooding the markets with goods or just restricting market access. So I think that it would be in the U.S.'s interest to dial back the rhetoric and try to be a little more diplomatic. It does not help to antagonize such a big player as China because the interests of China and the U.S. are just not aligned in this repect when it comes to North Korea."

CNBC Spokeswoman: "Bill made a good point just moments ago about the U.N., it is not just America's responsibility its just that we are their biggest target and we are the ones seen as maybe doing something about it especially with regard to China. If the U.S. moves forward and we act alone, does that mean there could be a risk that U.S. companies lose business in China to European rivals or Mexican ones?"

Sandra Navidi - Beyond Global LLC: "Yes, absolutely I think we can already see that U.S. CEO's are more reluctant to take a risk and make investments. They are taking more of a wait and see approach. European companies, amongst them German companies, are all too happy to move in and take over this market share. German companies are very strong in engineering, for instance, they just sold a huge robotics company there. When German companies go to China what China tries to do is have them disclose their trade secrets."

CNBC Spokesman: "Li, what do you trade with China? The reason I ask is are you likely to see tariffs imposed at some point and what are they likely to do to the trade relationship?" 

Li Zhao - China Iowa Group: "We primarily trade in agriculture products from seed to farming equipment. At this point, it is really hard to tell, earlier on, several months ago everyone was talking about the possibility of a trade war. We did entertain the idea that if that happened we might see retaliation of a tariff imposed on goods being exported to China. Having said that and given all of the tension going on right now, our governor is actually taking a all agriculture trade delegation to China in about two weeks from now. I think as President Xi pointed out the U.S. China relationship is kind of like a large vessel sailing on the ocean and there are storms from time to time that might impact how smooth the ride is, but at the end of the day economic ties and collaboration and agriculture trade among many other products is really the balancing stone for this ship to make sure that it will go forward and into the right direction. I think that we are in a perfect example right now given all of this situation, and I absolutely would agree that there is too much at stake that we really need the two sides to come together and have a very constructive conversation to tackle all of the issues." 

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