“You don’t want to start a trade war with China for the same reason you don’t fight a land war with Russia: They will ‘out-suffer’ you,” said Aaron Emigh, CEO of Brilliant, a smart home startup, at the 2019 Consumer Electronics Show (CES).
Executives at the CES panel weighed in on the impacts of trade policy on U.S. businesses, particularly where supply chains are disrupted and relationships deteriorate. China’s reputation for intellectual property theft also came under scrutiny, but U.S. policy was the primary topic of discussion.
“China is rapidly developing, so patent protection is not enforced,” said Emigh. “But it’s unclear how tariffs would address that [given] how they have been instituted.”
The trade war with China has created huge instability for BMW, a company that has a large manufacturing plant in South Carolina, from which it ships cars all over the world.
Executives said they’re confused by President Trump’s endgame, and criticized his use of national security as an argument to slap tariffs on China.
“Is there a legitimate desire to have more leverage?,” asked Lisa Errion, vice president of government affairs for BMW. “Yes. Do I think invoking national security provisions of trade are legitimate? No.”
Errion did concede that “There are some frustrations that are legitimate in terms of [the U.S.] not being treated fairly.”
But meanwhile, BMW is being encouraged to grow investment in U.S. under the new U.S.-Mexico-Canada Agreement (USMCA), “while at the same time being threatened with 25 percent tariffs as a natural security threat,” said Errion. “Those things don’t hang together.”
On March 2nd, the U.S. is set to increase tariffs on $200 billion of Chinese goods from 10 percent to 25 percent.
Sarah Thorn, senior director for government affairs at WalMart, zeroed in on what she termed a lack of clarity in the U.S. position as negotiations continue ahead of the March 2 deadline.
“The idea of trade policy was to open markets,” Thorn said, “but hurting China is actually the goal. It’s hard to see how to conclude a negotiation if the goal is unclear.”
Panelists said there was a silver lining. The average person knows more about trade now than they did before tariffs became part of the news cycle.
And it’s incumbent on industry to continue to explain the problems associated with tariffs.
“Populism is on the rise,” Thorn said, “and part of the reason we’re in this mess is we didn’t do a good job in real terms of explaining why trade matters.”