Jing Travel take: There has been a chorus of voices weighing on the looming trade war between the United States and China. One of the latest is Alibaba founder and CEO Jack Ma, who argues that a trade war will only be detrimental to the U.S. economy. This piece originally appeared on our sister site, Jing Daily.
In a post published on Alibaba’s blog Alizila Wednesday, CEO Jack Ma questioned the rationality of the emerging trade war between China and the United States. Entitled “Trade War Kills Jobs, Opportunity and Hope”, Ma’s piece is an unusually direct way, analogous to Trump’s tweets, of communicating a familiar argument: there are no winners in a trade war.
Jack Ma highlights how Sino-American trade benefits the United States, despite the deficit
Ma argues that China’s trade surplus has allowed it to pour investment into the U.S. economy, keeping interest rates and unemployment low.
He also singled out Apple as an example of a company whose massive profits are not reflected in the balance of trade figures. The purchase of cheap components and assembly in China appears to be a net cost to the United States, he says, when it, in fact, allows Apple to make significantly higher profits on its sales worldwide.
(Apple’s sales in Mainland China, Hong Kong, and Taiwan reached US$17.9 billion in the last fiscal quarter, which does count towards the balance of trade. Mainland Chinese account for a third of all iPhone users globally.)
Ma argues that America is starting a fight with China right at the moment when it stands to gain the most from the relationship — as China will soon become the biggest consumer market in the world.
Jack Ma and other major Chinese business figures stand to benefit greatly from unhindered Sino-American trade
Why does Ma care about America’s access to the Chinese consumer market? Because Alibaba stands to gain too.
Taobao, launched in 2003, initially focused on “consumer-to-consumer” sales. As the world’s factory, China produced things cheaply that could be sold directly to domestic consumers without brand and retail markups. In 2008, as the economy matured, it launched business-to-consumer e-commerce site Tmall, which drew in mass market foreign brands. Now, Alibaba is moving even further up the value chain, selling luxury items from foreign brands to Chinese consumers on its invite-only platform Luxury Pavilion, launched in 2017.
A trade war would push up the prices of American brands in China, meaning they’d sell less to Chinese consumers, including through their favorite platform. Tmall currently holds 51 percent of the business to consumer e-commerce market in China.
The full text of Ma’s post is available here.