Akarat Phasura/ stock.adobe.com
BUSINESS COMMENT
TRADING PLACES
Stanley Chao of All In Consulting discourses on
the Sino-US Tariff War and how it threatens to
affect the air logistics industry.
Presidents Trump and Xi Jingpi have
agreed on a new deadline of March
1 to settle the tariff war. But what
will really happen after March 1? Are we
heading for a full-blown economic cold
war? Will China allow Western companies
more access to its domestic markets?
The ongoing tensions have created
havoc in the world’s economy and in
dozens of industries. China and industry
experts have given detailed analyses
of how the trade talks will aff ect the
auto, agriculture, high-tech and steel
industries, because all these products and
commodities are on both countries’ tariff
lists. But what about the air logistics and
freight industry? It’s not targeted by China
or the US, and it hasn’t been mentioned
by industry analysts or pundits, but it’s
the one business that could potentially
suff er the most, or at least drastically
to me. Because of the increased China-US
tensions, Western manufacturers in China
now want to get out of China completely.
In the 1990s, I was assisting companies
to set up in China. Now, I’m asked to
negotiate joint venture buy-outs, employee
terminations and early rental agreement
exits. The owner of an auxiliary power
supply company in Shenzhen recently told
me: “These China-US tensions are real,
and it’s a long-term problem I don’t want
to deal with. As an American, why do I
want to work in a country that’s seen as
the number one enemy to the US?”
The repercussions of this paradigm shift
are obvious to the air logistics industry:
China, though still a major revenue
stream, will not see the double-digit
growth potential we saw in earlier years.
So, look to reduce China-US services while
expanding operations and routes to the
emerging countries in south-east Asia as
Western companies change their suppliers.
Regional isolationism
However, while China-US logistical
services will be reduced, it doesn’t mean
that China should be totally ignored. On
the contrary: China is commencing its
change in the coming months. Let’s take
a closer look at some of the unintended
consequences that the US-China trade war
could infl ict on the air logistics industry.
New routes
Even before Trump started with his
threatening rhetoric towards China, I
was seeing this paradigm shift of Western
companies moving out of China. It came
in two phases. In the early 2000s, I was
asked to fi nd low cost suppliers of air
compressors, motors and circuit board
assemblers in China. Now, the same
companies are asking me to fi nd similar
suppliers – but in Vietnam, Cambodia,
Indonesia and the Philippines. China is no
longer a low-cost supplier of goods and
services with its increased cost structure,
government regulations, and bureaucracy.
The second phase is more worrisome
28 February – March 2019 RAMP EQUIPMENT NEWS
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