As the trade war between the U.S. and China could escalate, CEOs are trying to figure out how they will mitigate the risks that could impact their businesses. Toyota, for example, created a “virtual war room” of about 150 employees to look into the potential impacts of different U.S. trade policy scenarios after the Trump administration imposed tariffs on aluminum and steel imports last year, sources told Bloomberg.
U.S. Treasury Secretary Steven Mnuchin said last month that the U.S. would soon impose the latest round of tariffs on $300 billion worth of Chinese imports, which comes on top of the boost in existing tariffs that came earlier that month on $200 billion worth of Chinese goods. That rate was jacked up to 25 percent from 10 percent. The looming tariffs on additional goods that are a month away may be as high as 25 percent.
“We are concerned that the U.S.-China trade war is going to affect everybody,” said Akbar Al Baker, CEO of Qatar Airways. Citigroup CEO Mike Corbat noted separately late last month that “if there’s a trade war, no one necessarily escapes that.”
In fact, Morgan Stanley Chief Asia Economist Chetan Ahya is predicting a U.S. recession in less than a year, should the Trump administration impose these new tariffs, and should Beijing retaliate.
However, while some companies are making moves out of China, other firms believe setting up shop in the country is worth the risk. ExxonMobil is building a multibillion-dollar chemical plant, expected to launch in 2023, because it sees the plant as a “lifelong investment” that will have a “50- or 100-year timeline,” said CEO Darren Woods. “While we’re sensitive to what we’re seeing in the current environment, and the implications, and understanding how these implications will play themselves out, we’re also trying to put that in the context of this longer-term time horizon.”
Some executives believe U.S. and Chinese trade negotiators can still come to an agreement. “There’s too much self-interest in keeping this thing on the rails,” said James Gorman, Morgan Stanley’s CEO, to Bloomberg late last month.