Looking at US company exposure to the Trade War
Tech giants getting hit harder than the farmers as the tech supply chain dismantles
The Belt & Road Today
The U.S. Companies With The Most Exposure To China
Thousands of U.S. companies are asking for tariff exclusions
What matters for the 2020 election and beyond
Thai PM: Chinese premier's visit to will further deepen Thailand-China ties
AI is getting caught up in politics
US Company Exposure To The Trade Wars
With the exception of the casinos that have a big presence in Macau and count on Chinese gamblers, high tech companies have the largest indvidual exposure to the outcome of the U.S. - China trade war. The chipmakers lost one of their biggest customers in Huawei due to the Trump admistration blacklist. Apple also has a nearly 20% revenue exposure depending on the outcome.
From a sector perspective, in addition to IT and Communications Services, a number of key industry sectors have non-trival exposure to China.
Big Backlog In Tariff Exemptions
Given Trump’s core strategy to “punish” with punitive tariffs, most of the damage caused by the trade war has been inflicted by successive “tranches” of tariffs. The tariffs themselves and the uncertainty around when more may be levied or if recent tariffs will be rescinded has put the brakes on business worldwide and caused companies to quickly (and expensively) rework their entire supply chains.
Just in case you were wondering, a tariff is a tax levied on imported goods and paid by the importer. Consumers generally bear the burden of the tax when the import is a final consumer good, and manufacturers generally bear the burden when the import is an intermediate good although it depends on market conditions and numerous other factors.
Most big American companies have already filed for exemptions to as many of the tariffs as they can. For SMEs with fewer resources, the best approach is to search cases by the names of the larger companies that would also be using the same types of products and try to find out if their cases have been approved and then file similar requests for exemptions.
One result of the sudden increase in tariffs is a huge backlog of tariff exclusion requests that have yet to be processed by the US Trade Representative Office. This results in delays and also slows down business growth as companies want to wait to see if their exemptions have been granted prior to importing goods subject to the tariffs. Below is a graph that shows how US Imports from China have been ramped up in successive tranches through actions of the Trump Administration.
How is the Belt and Road Initiative Actually Managed By The Chinese Government?
As Figure 2 below from an article in the China Leadership Monitor attempts to makes clear, the Belt and Road developed mainly through an array of government ministry plans and projects, attempting act on the vague intentions from the top. Note the lack of official party documentation to govern the BRI.
The BRI is almost always presented as a “highly centralized and coordinated” initiative. In reality, it has a highly centralized and coordinated marketing campaign attached to the less- coordinated activities of China’s state-owned enterprises and of asset managers who seek better returns or more access to state largesse by going overseas. Moreover, the campaign breaks down once it encounters local organs. This leads to the second source of domestic criticism: the inability of Belt and Road mandates to force local governments to venture overseas. - Ryan Manuel
AI Supremacy Becomes Politicized
As the U.S. and China vie for technical leadearship in this AI, the U.S. approach of leaving much of the funding for research to the private sector has been coming under fire as “too little, too late”. Also having the technological prowess reside mainly in for-profit enterprises makes it difficult for the U.S. government to leverage the latest technology for strategic or national security needs.
"There's a risk of ceding the choice of technologies to the adversary," says Tom Dietterich, a leading AI researcher who teaches at Oregon State University. "If China goes deep into something, then should we be going into that same thing because we don't want to lose to them on it?"
The next industrial revolution will be all about AI. The countries who re-tool their workforces and education systems to meet this challenge will be the big winners. Those that don’t will face growing unemployment and underemployment issues.
"We fundamentally believe America must lead the world in critical emerging technologies," U.S. Chief Technology Officer Michael Kratsios said at Stanford this week. That is good to say, but the Chinese government can direct companies to work on a problem it decides is pressing, while the U.S. has to convince companies the problem is worthy of their investment. 5G leadership has already passed the U.S> by. Watch for more and more politicians adopting a line of messaging that the U.S. needs to do whatever is necessary to maintain its tenuous technical lead in AI and derivative technologies.