Why Trade War is NOT benefiting US and CHINA

*This article was originally a speech given at the Beverly Hills Toastmasters in July 2018 by Junyi Li, a cross-border trade, investment and marketing professional studied and worked in US and China for over 6 years. 

Madam Toastmaster, fellow members and most welcome guests: 

During my icebreaker speech, I did not share much about myself, my profession and my passion. Today I am going to officially break the ice, and my topic is 'Product trade, travel trade, a journey from East to West'.

About 6 years ago, I started my career as a trade specialist at US state trade office in China where I helped local businesses in Great Lake and East Coast states develop their distributions and market entry strategy in the world's second largest economy. 

That was when trade war has not yet started, local businesses in the US were actively looking for solutions and opportunities in China, and were trying to develop more sales channels to generate profits. It was a fulfilling job, amazing stories and learnings happen one after another. Ultimately, it trained my capability to be a truly global thinker, and a positive supporter of global trade.

My first client was a barbell manufacturer from Michigan which developed a uniquely designed body builder equipment used by UFC athletes and professional trainers in the US. Whether it would succeed in finding a customer in China was just a day dream back then because nobody even understood how to use it. It was not a regular gym barbell and was shaped in a different way that require more strength, tactics and knowledge to correctly utilize to train their body core. Another devastating problem was, the brand name was very hard to translate in Mandarin. 

After undertaking extensive market research, I identified all the potential sports equipment distributors, athletic schools and associations and finally found two distributors highly interested in the product. Another two years of market development proved more success of the product in the market. In 2016 the company achieved 2 million CNY sales in the market. That is an impressive number. A translation from the popular and interesting nick name in the market.

My take-way from the story is, body builders represents a special consumer segment both resides in East and West, and they share common hobbies and training habits. In another word, crazy training equipment that regular consumers don’t purchase, may find a good market for this particular segment in both cultures. So if you decide to discover a market, don’t doubt yourself first. Impossible is nothing which is very true for sports equipment market.

My second story was about granola bars. In 2015, a Tennessee based food company had this great idea to introduce granola bar to China. That was when Granola bar was still a new term in the market and whether it would do well was still up in the air. A potential problem was, it may taste too sweet for Asian consumers. 

Any journey has to start somewhere. For a new business, trade show is always a choice. In 2015, The company decided to setup a booth in the largest food trade show in China - SIAL CHINA, present product samples and collect some initial consumer feedback.

We then found ourselves lost in the best food selections from around the world, our little granola bar booth were surrounded by Wine from Napa, ice cream from Russia, in comparison, we were nothing interesting or attractive. Chance seemed to be little for Granola Bar to get popular as we were facing so many tasty competitors in the market. 

However, in a few days visitors started to emerge for our free samples. Many of them were in the grandparents age. The market reaction was pretty good, some people think it is healthy and others like the taste. 

Afterwards, e-commerce and offline distributors also showed up at the booth. Many of them were expecting to import healthy food especially healthy oats and whole grain, or organic food. With consumer’s average income growing to a higher level, more people were craving for quality and healthy life. That is truly a positive signal for the healthy granola bars. 

Nowadays, granola bars are no longer a new term in the market, many well known brands and local food manufacturers are selling via e-commerce and grocery channels. Again, nothing is impossible. With 1.3 billion people in the market, there is always a demand for healthy food! 

The third story is about a company that hasn’t succeed yet. They were trying to solve a severe natural disaster along the Mississippi river - the asian carp disaster. 

Asian carp is a fish specie originating from Asia and face no nature enemy in US waters. After finding home here, they have grow aggressively and destroyed the sports fishing industry along the Mississippi Rivers, creating devastating threat to local economy. 

This company was aiming to solve the issue using global trade with Asia. Since asian carps is a popular food in Asia, their big idea was to set up facility to process fish into fish meet, fish balls and ship to Asia. Sounded like a plan, however difficulty was enormous. 

First of all, tariff is high and thus margin is low. They also face complicated logistic and manufacturing issue. Two fishing company already tried and failed, but I do hope that one day, this client will succeed or another one will have the courage to try. 

Because if they succeed, it will then benefit both people in the east and west - on one side people will be able to enjoy organic fish products, while on the other side, people can start sports fishing again. That is an ideal goal that only global trade can help to achieve and it will be benefiting the global economy as a whole.

After 3 years of interesting journey in product trade, what I have been doing mostly in the US now is service trade ( travel trade ). Travel trade is about moving people instead of products across the border. It is a fun business, I really liked it. 

In fact, many US tourism destinations are benefiting hugely from travel trade, many retail shopping destination are seeing international tourism spending an important driver of their revenue.

However, with trade war going on, everything is somewhat going down. Both product trade and travel trade have seen a decrease over the years. It has negatively impacted millions of people’s business and lives. I was concerned when looking back these years and see how things have changed and concluded some serious thoughts about the situation we are in right now. 

First, the future of US-China trade, where it is going and how it will change us remains unknown, this imposed uncertainly and less opportunity in many ways for our lives and the business world. Yet, dynamic balance lies in anything, including trade war. Eventually the trade war will come to an end, because it is not benefiting the majority of the business.

Think about it, after 25 % tariff imposed on imports from China, price of shoes, household appliances, beef, frozen fruits and vegetables will all increase inside US market. According to University of Chicago, washing machine price in the United States has reported to increase by 12%, dryers prices are also increasing now.

On the other hand, farmers in mid west are going out of business because with China imposing 25 % tariff on importing soy beans and rice, it is so difficult for them to export their product anymore. 

Furthermore, 173 US businesses including Apple, Nike, Adidas sent complaint to President Trump saying that trade war will bring catastrophic results to consumers in the end. In fact, it is a common sense that no one can do business by themselves anymore in this world. We are all closely connected one way or another. Global Trade is so important to our life and it is our future. 

I stay positive in the future of global trade. If any business from need to find a solution, a market or a supply chain partner in China market. I am always here to help. Sharing resource and knowledge and helping people around the world to know more about the potentials in another market is always a great pleasure. And I hope one day, things will go to a balanced track, or a better world for us to live in again.

Thank you.

For more information, please contact Grace at [email protected]

*The Benefits of International Trade

Resource: US CHAMBER OF COMMERCE https://www.uschamber.com/international/international-policy/benefits-international-trade

America cannot have a growing economy or lift the wages and incomes of its citizens unless we continue to reach beyond our borders and sell products, produce, and services to the 95% of the world’s population that lives outside the United States. 

Why is trade important?

Jobs. Nearly 39 million American jobs depend on trade, and trade is critical to the success of many sectors of the U.S. economy. 

Growth. According to economic data from the Federal Reserve Bank of St. Louis, U.S. real manufacturing output has risen by nearly 80% over the past 25 years. This represents the continuation of a long trend: U.S. manufacturing value-added has grown eightfold since 1947 in real terms.

Business. 98% of the roughly 300,000 U.S. companies that export are small and medium-sized businesses, and they account for one-third of U.S. merchandise exports, according to the U.S. Department of Commerce. The number of small and midsized firms that export has risen about threefold over the past two decades.