Concern verges on panic in supplement industry over Trump's China trade stance
Trump has made any number of bombastic statements about China. While the President elect has a penchant for off-the-cuff remarks that may or may not form the basis for subsequent policy decisions, his anti-China tone has permeated his official statements as well. For example, in the presidential debate with Democratic candidate Hillary Clinton that was held in late September, Trump had this to say in his opening statement: “Look at what China is doing to our country. They are using our country as a piggy bank to rebuild China.”
Strident China critic named to Cabinet
In addition to his unprecedented communication style,Trump also raised eyebrows with his choices to fill positions in his cabinet. Many of these nominees lack government experience or academic credentials, and seem to have been chosen either on the basis of their personal wealth (which could be viewed as a measure of business acumen) or their past loyalty to Trump. It is interesting then, that the one Cabinet nominee who does have academic bona fides as an economist has a long standing history of hostility toward Chinese trade practices.
In mid December Trump nominated Peter Navarro PhD, a Harvard-trained economist who is a professor at the University of California Irvine, to lead a new White House office overseeing trade and industrial policy. Navarro has characterized the US-China trade relationship as essentially an economic war waged by China in which exports to the US are subsidized and US imports into China are stonewalled. Navarro produced a documentary available on YouTube called “Death by China.” In the introduction of the video, Navarro said, “Help defend America and help protect your family. Don’t buy Made in China.”
Stigmatizing trade with China and products originating in China could potentially become a big issue for the dietary supplement industry. Many dietary supplement products that are assembled in the US use Chinese-made ingredients, and in certain ingredient categories, such as some of the letter vitamins, few alternatives to these are available.
Panic in China
Scott Steinford, CEO of the CoQ10 Association, which includes a number of Chinese members, said Trump’s rhetoric is contributing to a rising tide of panic in China. While the mainland Chinese are becoming ever more sophisticated and knowledgeable about the rest of the world, the role of freedom of speech in society is still not fully appreciated there, he said. Thus, Trump’s spur-of-the-moment broadsides are viewed with alarm and the current political situation in the US is viewed by the Chinese as being dangerously out of control.
“We, as a historically free society, more completely understand the importance of freedom of speech and the combined benefits and traps this domestically recognized fundamental right provides. China, as a society, has a degree of comfort with the fact their government can control the outliers and disruptors. Social media does not play the same role or have the same impact as it does here and Twitter does not exist,” Steinford told NutraIngredients-USA.
A number of Chinese experts who were contacted with the aid of Steinford echoed that caution and even alarm about what Trump might mean for trade in the dietary supplement realm.
“Trump will likely focus on encouraging the purchase of ingredients from the United States. He seems to indicate this action will be supported by import taxes and other tactics,” said John Zeng, vice president of Yunnan Alphy Biotech Co. Ltd.
Belinda Han is general manager of Xiamen Kingdomway Group Company in Xiamen, China. This company is the world’s single-biggest manufacturer of CoQ10. Han said Trump’s personal style of bluster verging on insult is ruffling feathers across the Pacific, and might contribute to the burning of bridges that will be hard to rebuild.
“Trump is too outspoken and does not seem to take the feelings of the Chinese government or people into consideration. The relationship between the two countries has become risky and nervous with a trade war a possibility at any time,” she said.
Higher tariffs seen as likely
Other experts have adopted a less nervous tone, but still believe significant changes are in store for the US-China relationship. Prof. Zhongzhong Hu, who studied at Vanderbilt University and who teaches international business and economics at Beijing University, said he believes some tariffs on Chinese-made goods are likely to rise. But in the end, he believes Trump is a businessman first and a demagogue second, and may simply be angling for a better deal.
“Trump is a businessman that will likely step back on arousing political problems and instead focus on favorable investment/trade policies which encourage multinational enterprises in China,” he said.
Costs could go up; transparency could suffer
Attorney Justin Prochnow, a shareholder in the firm Greenberg Traurig, said Trump’s shining of a spotlight on the China trade situation could mean both less transparency in the dietary supplement industry and higher costs for consumers.
“If the President elect decides to put tighter reins on trade with China it will force companies to look elsewhere to source higher-cost ingredients. Ultimately most of those costs will end up getting passed on the the end users,” Prochnow said.
“Whenever there is a stigma associated with something it may cause companies to think twice about going down that road or to diminish or cloak how much of a role that has in the manufacturing of the finished product,” he said.
Herman Zhang, CEO of Pacific Rainbow, concurred with Prochnow’s assessment. Tariff hikes would be “bad for business and bad for the industry because these increases would likely result in lower sales volumes and fewer consumers,” he said.
Ultimately, though, Steinford said there is too much momentum behind the US-China train for one politician to derail it so easily. And in the end, no one yet knows what Trump really intends to do.
“The only truly known factor in these days leading up to the new administration is anxiety. This nervousness will eventually give way to awareness and with a proper strategy, planning and communication the outcome will undoubtedly be positive,” he said.