Alibaba Among Chinese Companies That Aren’t Worried about Trump’s Trade War
The trade between the U.S. and China just got more intense this week with a fresh round of tariffs getting imposed by the Chinese government in a tit-for-tat retaliation worth $16 billion as response to an identical move by the Trump administration. Now some Chinese technology companies are going on record saying they aren’t especially worried about the looming trade war.
Their general message is: We can look outside the U.S. for suppliers.
Joseph Tsai is Alibaba’s (NASDAQ: BABA) chairmen and he told analysts on the company’s recent earnings call that the latest round of tariffs isn’t anything to be afraid both in terms of the company’s business or the Chinese economy itself.
Tsai said that Alibaba and similar companies had the full backing of the Chinese government in terms of brokering deals to source goods from non-U.S. based suppliers.
“This coming November, China will hold the world’s largest import exhibition in Shanghai that will showcase products from all over the world,” Tsai mentioned. “If US goods become too expensive due to tariffs, Chinese consumers can shift to domestic producers or imports from other parts of the world.”
The Chinese do have a growing sense of anxiety about the trade dispute. Bloomberg estimates that if the U.S. goes forward with a more advanced round of tariffs on $200 billion in Chinese goods (at least 30 percent would be consumer goods which everyone here in the States would be affected by), then Chinese GDP growth could be stalled by as much as a full percent which is a huge fear for China. Their GDP growth has already been close to hitting decade-lows and U.S. regulators are most likely counting on that fear as leverage.
Despite this, the overall trend is that China is sourcing more and more products from other countries while the Americans are doing the opposite; they’re imports from China are relatively flat over the last few years.
Alibaba only exports about 5 percent in terms of its core commerce business. Domestic Chinese sales are still over 90 percent for the company and investors will be pleased to hear that the company is confident it can mitigate any potential product cost increases via switching to new suppliers.