The founder, chairman and CEO of FedEx Corp. (NYSE:FDX) believes President Trump holds unique views on international trade. It wasn’t a compliment.
Frederick W. Smith, speaking today in Singapore at an event hosted by Bloomberg, said Trump’s perspective on the dynamics of global trade and commerce are “quite rare.” Trump has gone against the grain of every president since Franklin D. Roosevelt who, despite isolated pockets of dissent, has pushed for open, subsidy-free trade with a reduction, and eventual elimination, of non-tariff barriers, Smith told the gathering. The legendary executive, whose public appearances are few and far between, also spoke one-on-one on the event’s sidelines with Bloomberg anchor Eric Schatzker.
Smith said the U.S. and the world are in a tug-o-war between the forces of free trade which provide the best opportunity to pull millions out of poverty, and those of “mercantilism and nationalism” which seek to restrain will be self-defeating. Calling himself an “optimist,” Smith said the clarion call of capitalism will overwhelm the “political resistance” to open markets and the free exchange of goods and services. In that vein, China will become “much more open” due to the desire of its people to embrace opportunity, not to efforts by the Trump administration to strong-arm Beijing through higher tariffs on a broader range of imports, Smith said.
FedEx is not dramatically affected by the trade tensions between the two countries because the traffic subject to tariffs make up a small percentage of its $70 billion in annual revenue, Smith added.
Smith said FedEx customers in China have expressed a desire to shift their supply chains to countries like Vietnam, which is not only out of the line of geopolitical fire but has labor costs roughly one-fourth that of China. However, the supply ecosystem in China is so well-established that companies thinking about relocating to a lower-wage but less-mature nation may find the challenges of doing so are not worth the labor savings, he added.
For nearly two years, Smith has waged a quiet battle to preserve the existing rules-based system from the protectionist impulses of Trump and other foreign leaders. FedEx bitterly opposed the U.S.’ 2017 withdrawal from the 12-nation Trans-Pacific Partnership, warning it would narrow opportunities for U.S. exporters and give China an opening to eventually dominate Asia-Pacific trade. Smith relinquished the president’s role, and the day-to-day responsibilities that came with it, so he could focus on broader trade issues, some have said
In the interview with Schatzker, Smith said FedEx’s overall business is “strong,” and there are no plans to pursue acquisitions in Asia. “There’s no acquisition that we need to make,” Smith said, noting that the region does not have an express carrier with the scope of TNT in Europe. FedEx acquired the Dutch company in 2015 for $4.8 billion in cash.