USA- China Trade War Escalates – But who will benefit?

Posted on Posted in News 1

As USA announces a further tariffs on Chinese goods worth $200 bn Britain continues to woo China with a view to increasing trade.    China has retaliated by announcing it will impose higher tariffs on most US imports on a $60 bn US target list.  UK Chancellor Philip Hammond warned an escalation would be very dangerous for the UK.  The UK has a very open economy and relies on world trade, something which is threatened by the on going dispute.  This is already being seen in a reduction in global growth forecasts as a result of the new tariffs being imposed.

So is this really bad news for UK businesses?  Every coin has two sides and in adversity lies opportunities.  Whilst in the longer term such disputes are un welcome and as neither side wins from this dispute it is likely that common sense will prevail in the end and normal trade relations will resume, albeit perhaps wit a slight shift in balance.

In the short to medium term however there are real opportunities for business prepared to seek them out.  For exporters the dispute will lead to increased costs of US goods in China leaving UK companies the opportunity to fill the void with more favourably priced goods.  Entering a new market is always the most difficult and having a price advantage over your competitors always helps.  Once the new links are established and new trading patterns become the norm it is easier to maintain these when US-China Trade tariffs fall.  So if your business is looking to expand overseas, now is the tie to hit the second biggest market in the world – China.

For importers there are advantages too.  The increased tariffs will inevitably over the coming months lead to increased consumer prices in the countries concerned as importers look to pass on these increased taxes.   As a result demand will fall leading to surpluses and factories with over capacity looking to sell their excess stock at discounted prices.   UK importers can take advantage of this window to increase margins or increase sales volumes by buying in at lower prices.  This bonus will not last however and as the markets adjust and factories re organise the prices will slowly rise back to normal.  The businesses who get in first will be the ones to gain the advantage. If you buy from overseas – you need to act now to avoid being left at the bus stop by your competitors.