The Trade War is over. China Lost but the Reason May Surprise You

By: Greg Owens, Co-Founder & CEO, Sherrill Manufacturing/Liberty Tabletop
Posted May 12, 2020

The worst fear of any business owner is the loss of a major customer.  The same applies to a country, particularly one that relies heavily if not exclusively on exports to drive their economy. Such a loss usually comes as a big surprise and thus is extremely difficult to prepare for. The Chinese Covid-19 crisis is no exception.

The reaction and outcome obviously depend on the magnitude of the revenue loss. In the case of China they just lost their most important customer, the American consumer, and are facing the extreme likelihood that Western Europe will soon follow suit. Their world and entire economic model has literally been turned on its head in the past 6 weeks.

Up until the Covid 19 crisis the trade war had been primarily fought in the government arena. Tariffs, trade deals, WTO battles and bilateral jockeying. Big money globalist interests put up stiff resistance to Trump, Sanders, Warren and any other force that was trying to reverse decades of globalism. The American consumer was marginally engaged on the issue politically, but real activism was limited in scope. Not anymore.

Clearly the anti-China rhetoric has heated up in Washington, but, in the 30 odd years that I have been following the steady march toward a globalized economic and political structure, I have never witnessed anything close to the level of reversal we are seeing today from the public. Washington has made a major and bipartisan pivot on the issue but that is only part of the story and one that will take time to unfold. It is the American consumer that has sprung into action.

The last time I remember anything remotely close to this was the mainly union-led consumer revolt against Japanese made cars and electronics on the 1970’s. This is different. The level of anger and the scope of the anger towards China that is brewing right now is without precedent. Way beyond a few thousand job losses at an automobile plant in Detroit, this time many Americans are viewing our dependence on China as both a national security threat and a threat to our very sovereignty as a nation.

Many in Washington and in the private sector have been sounding the alarm for over a decade. Recently a report was issued analyzing the vulnerability of our national defense supply chain. Not surprisingly the results were alarming to say the least. But, like most things in DC, up until this point there has been much talk and little action. That is not the case with the American consumer. Interest in “Made in America” has skyrocketed off the chart to a16 year high according to Google Trends.

In the past 4 weeks there has been a literal grass roots uprising of anti-China pro American purchasing behavior. It is not defined or confined by political party or any other sort of identity politics. It is broad based, nonpartisan and very wide in scope. It includes those who are frightened by the job losses during the pandemic created lock down of our economy, in includes those who now see China as a clear economic, political and military threat, it includes those who blame China and call out their irresponsible efforts to cover up the threat of Covid-19, and it includes folks who have always been skeptical of the Communist Beijing regime. Two-thirds of Americans say they have an unfavorable view of China, according to a national poll by the Pew Research Center. The change is sharp and the change is extreme.

While Washington plays catch up with legislation and Executive action designed to further decouple from China, stimulate the American manufacturing economy and support Made in America issues in general the American consumer will lead the charge. To support the information we are seeing in polling and in the Google search analytics, I can tell you that sales of our American made flatware are up over 150% year on year in the past six weeks with no sign of slowing down. Before the pandemic they were trending up about 20%. Add to that in dozens of customers “Buy American” comments on their purchases and the message is clear. The American consumer has sprung into action and there is every indication that the trend will last a long time.

Exactly what the reaction of China will be to the loss of their biggest customer remains uncertain. What we do know is that they are going to need to re-invent their economic model to accommodate the new reality. This is also not something that they are going to be able to negotiate their way out of because it is not the U.S. government that is behind the change, it is the American consumer who has just effectively stopped buying their brand. Similar to but far more significant than the days and years following Tiananmen square, this is a game changer for China. It is one that will require them to radically modify their behavior if they want to be given another chance to resume their rise within the world economic order. Regardless of what they are able to negotiate politically with Washington and others It will take a long time to win back the American consumer. The modern day era of China-dominated globalism has come to an end.