2017-11-08 / Business

Businesses brace for unexpected on President Trump’s Asia tour

BY KELVIN CHAN
AP Business Writer

HONG KONG

Some businesses in Asia are bracing for the unexpected as President Donald Trump traverses the region and meets with the leaders of major U.S. trading partners. Exporters are apprehensive, given Trump’s penchant for unpredictability, his vehement dislike for swollen U.S. trade deficits, and his threats to rip up trade deals.

Trump began his tour in Japan, where he vowed to reshape the trading relationship, saying it’s “not fair and it’s not open.” He stopped in South Korea on Tuesday and will next travel to China, Vietnam and the Philippines, including stops at three regional summits. That allows him plenty of chances to showcase his assertive style and make off the cuff remarks that could leave his hosts and adversaries scrambling to react.

Here’s a look at the mood among a few U.S. and Asian businesses watching the trip.

Off the script

Trump’s tendency to make impromptu announcements and his frequent threats to punish trading partners have brought heightened uncertainty to overseas presidential visits that traditionally are meticulously choreographed, said Rick Helfenbein, president of the Washington based American Apparel & Footwear Association trade group.

“We have an unscripted president going into a scripted environment, so you never know what he’s going to do,” he said.

Trump may announce some big deals by U.S. companies selling to China to help lower the trade deficit, said Jake Parker, vice president of the U.S.-China Business Council in Beijing, a group seeking fair access to China’s market.

Or he might opt for a harder line, such as trade investigations that could invite retaliation.

“Our companies are frankly concerned about the types of retaliation that would come along with a more assertive China strategy,” Parker said. There are fears any Chinese government retaliation “would be very visible, and would target high profile U.S. brands that are operating in China.”

“Our companies frankly don’t want to be caught in that kind of crossfire,” he said.

Supply chains

Export manufacturers already are on “high alert” over possible disruptions to their global supply chains because of stalled talks with Canada and Mexico on revising the North American Free Trade Agreement, Helfenbein said. Trump has blasted NAFTA as a job killer and wants it revamped or else he may pull out.

That’s left companies in North America looking for alternative manufacturing locations, Helfenbein said.

“Right now what looks stable to them is Asia,” Helfenbein said. “If Asia gets disrupted by this president’s trip then, oh my God. What are these companies going to do? Because that’s part of their strategic planning and strategic thinking.”

For some manufacturers, like Hong Kong LED-bulb maker Keyart Industries Ltd., there’s little to do but wait and see what happens.

“It’s out of our control,” said general manager Brian Lau. “We’re worried but there’s nothing we can do about it.”

He said hopefully the “trade is going be there” no matter who is president.

Keyart’s joint venture plant in southern China’s factory heartland of Guangdong province exports to the U.S. and Europe. For electronic and electrical goods makers, moving operations would be difficult because of China’s vast and intricate supplier network.

“Americans don’t really make these lamps, so where are you going to buy them from?” Lau said. If the U.S. slaps tariffs on Chinesemade goods, “the cost is ultimately going to be put back on customers.”

Bigger worries

Other manufactures shrugged off Trump’s threats, saying they have bigger concerns, such as brutal competition from local rivals.

“What can he do about it? Business, it recognizes only profit,” said Shaun Cai of Ceeport Samaf, a Guangdong toilet maker that exports to the U.S., Australia, Southeast Asia and the Middle East.

Exchange rates, specifically the dollar’s weakness against the Chinese yuan over the past year, are another headache.

“When the rate comes down we get less (yuan from dollars) and we’re losing money,” Cai said. “If it goes down too far we have to ask the client to pay more. We need to raise the price for them and that’s not good because they won’t be happy.”

Korean jitters

Businesses in South Korea are watching for remarks by Trump about the South Korea and U.S. free trade agreement, dubbed KORUS. The two sides are negotiating adjustments to the deal, and South Korean companies fret their industries might be singled out.

“There are worries among some sectors with big exports to the U.S., such as autos, while steel and consumer electronics are more concerned over regulations on imports,” said Lee Jongmyoung, a director at the Korea Chamber of Commerce & Industry.

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