Trade tensions with US testing resolve of Chinese consumers

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Guo Qingshan poses on his Harley-Davidson motorcycle in his village outside Beijing, China, April 7, 2018. REUTERS/Thomas Peter

(Source: Manila Bulletin, Reuters | April 20, 2018)

Guo Qingshan delights in riding his 400,000 yuan ($63,839) Harley-Davidson (HOG.N) motorbike around Beijing’s suburbs.

However, Guo has his limits.

Deteriorating trade ties between the United States and China could mean American imports, including Harley-Davidson motorcycles, could be much more expensive in the future as the two countries trade tit-for-tat tax hikes on each other’s goods.

If prices rise, Guo said he wouldn’t contemplate buying another Harley.

Since entering office, US President Donald Trump has taken a hard line on trade. Last month, the world’s biggest economy said it would impose tariffs on steel and aluminum imports from most trading partners, including China.

In response, China slapped additional import taxes on 128 US products, including frozen pork and wine. Soon after, it said it was considering additional duties on 106 US imports, though it has not said when the new tariffs could kick in.

US goods in the crossfire range from soybeans, cotton, autos and auto parts, to whiskey and particular varieties of wheat, with their value totaling $50 billion.

The tensions are already affecting consumers in China.

Zang Yi, owner of a Tesla (TSLA.O) car, said if the trade tensions resulted in pricier US.imports, she wouldn’t consider American brands when the time comes to buy a new car.

“With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla,” she said.

Liu Anqi, 25, has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada.

“Flour is one of the most important ingredients in baking and its quality varies with different brands,” Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away.

Already expensive

Not all business owners are concerned.

At Wolfgang’s, a high-end steak house in East Beijing’s Sanlitun district, head chef Liang Xin said US beef has always been limited in China, so he doesn’t know how customers would react if the restaurant has to raise prices.

A 15-kg whole cut of beef from the United States is around 20 percent more expensive than its Australian counterpart, said Daniel Sui, deputy general manager at Wolfgang’s.

“Customers like US beef because it tastes juicy and tender, but Wolfgang’s only sells around seven to eight pieces of US imported beef steak each day,” Sui said.

“The limited supply is because the Chinese government bans feed additives and only 5 percent of US beef is qualified for export.”

Liu Ming, a chef at a Sichuan restaurant in Beijing, said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won’t change the brand even if prices rise.

“We use this oil because it gives the food a bright color and does not leave a strange smell or taste,” he said.

“We don’t know what will happen to our dishes if we change the oil.”

 

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