As the two largest national economies embroil in a trade showdown, it is individual companies which are in the centre of extensive reportages and economic commentary: the dispute is not just between the two countries, but also between corporations and policy makers, as the former are usually opposed to protectionist approaches. In the accelerating tit-for-tat dynamic, communication professionals have to design strategies demonstrating to both stakeholders and consumers that their business has a firm grip on the situation.
Let’s do a quick recap. After one of his Twitter bravados (“trade wars are good, and easy to win”), Trump fired the opening salvos by slapping 25% tariffs on $50 billion worth of Chinese goods, including televisions, aircraft parts and medical devices. The president wants to punish Beijing for allegedly having unfair trade practices, including stealing intellectual property and making foreign companies hand over technology operations to Chinese counterparts in exchange for market access. Trump also strives to reduce the massive trade deficit with China, which stood at about $375 billion last year.
In response, China said the US is starting “the largest trade war in economic history to date” and introduced 25% tariffs on $34 billion worth of US goods, including agricultural products, cars and marine products.
The US is specifically aiming at China’s high-tech industry to create economic hurdles on the government’s “Made in China 2025” initiative, designed to boost the country’s manufacturing power. On the other hand, China is specifically targeting major US agricultural exports coming from states with many Trump supporters, where economic instability right before the 2018 midterm elections would anger the president.
As ever, the media plays an essential role here. Reuters reported that China has issued strict rules limiting the trade war coverage and open commentary, and banned attacks on Trump because it is afraid that negative reporting could cause instability in its financial markets. A memo to journalists at a state-run news outlet said that the media has to “stabilise the economy, growth, employment, stabilize foreign trade, investment, finance, stabilize the stock market, the foreign exchange market, the housing market, and basically stabilize the peoples’ thinking, hearts and expectations”.
As many US investors fear that the dispute would have grave repercussions for the global economy, “trade war” headlines are all around English-language news. Forbes even suggested that the media has overinflated the risks of the conflict. The business magazine cited William Reinsch, Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.: “The media continues its quest for ‘pain stories’ of companies closed, workers laid off or farmers bankrupted because of our trade policy. These are always anecdotal—the first round of $34 billion is not likely to have a major macroeconomic impact—but a good story can often transform public opinion, so stay tuned.”
Breaking Down the Stories
Surveying this extensive coverage, the bulk of which are indeed “pain stories”, we found which companies are in the centre of media’s interest and have the highest number of mentions.
With some of the worst-hit stocks, Boeing’s shares are down more than 12%, and the Wall Street Journal called it “an unofficial proxy for fears about an escalating US-China trade war”. China is perhaps the most important market for Boeing, accounting for 25% of US aircraft manufacturer’s 2017 deliveries and 20% of its 5,800-plane order book.
As a starting point for its communications strategy, the company was quick to issue a statement warning that the tariffs would hurt not only itself, the global aerospace industry as a whole: “We will continue in our own efforts to proactively engage both governments and build on the recent assurances by US and Chinese leaders that productive talks are ongoing. A strong and vibrant aerospace industry is important to the economic prosperity and national security of both countries.”
Boeing’s CEO Dennis Muilenburg has continued this focus on economic prosperity: he underlined that the relationship between the two countries also creates U.S. jobs. “China is an important relationship for us. So we look at the aerospace market for commercial airplanes and the next 20 years, the world will need 41,000 new airplanes and more than 7,000 of them will be in China. We are doing well in China, and our Chinese customers are very important to us.”
The state of affairs is quite different when it comes to ZTE, China’s second largest telecommunications company and the fourth-largest smartphone maker in the US after Apple, Samsung and LG. The company has been caught up in the conflict since it released a briefing to the Hong Kong stock exchange, in which it reported that it had ceased “major operating activities” after the US banned American firms from supplying it with hardware and software. This came after the Commerce Department found out that ZTE had been exporting products containing American components to Iran and North Korea in violation of the US sanctions against these countries.
The company, which depends on US parts, put its website and major e-commerce platforms “under construction”, and its official channel on Chinese retail network Tmall, one of the world’s biggest e-commerce websites, displayed a photo of men rowing a dragon boat and the phrase “Spring is used for struggle”, an expression used by Chinese president Xi Jinping.
The pressure prompted US telecommunications giant AT&T’s to withdraw from a carrier deal with Huawei, the world’s largest telecommunications equipment supplier – a move strengthening the tensions between US and China. The head Huawei’s consumer business Richard Yu Chengdong told a media round-table in Barcelona that the US government and some competitors fear the Chinese telecoms company is “too strong” and that they are employing political moves to keep it out of the US market.
Those angry remarks were an unfortunate communication mishap: Chengdong was not authorised to comment on these issues on behalf of the company. Afraid that what he said might hurt the giant’s corporate image, Huawei’s communication team had to patch up the situation by distancing the company from Chengdong. Chen Lifang, the head of communications, said: “It’s not right to blame the other party for not accepting us, we can only try harder, maintain our openness and transparency and wait until the other party is willing to communicate with us.”
Several days after ZTE ceased operations, Trump tweeted that he is “working together” with China’s President Xi Jinping to give ZTE “a way to get back into business.” This was interpreted by media as a strategy to make China buy more US products during the trade talks. After a nearly three-month ban, the Commerce Department finally decided this week to sign an escrow agreement that paves the way for the company to resume business.
A Lose-Lose Situation
But the company which is often said to be most at risk from the trade tensions is Apple, the world’s most valuable publicly traded organisation. Nearly all of its manufacturing and assembly are done in China, whose market accounts for around 20% the company’s revenues. It also operates its services like the App Store and Apple Music in that country.
Apple has traditionally had a very CEO-centred marketing strategy: the presentation and storytelling skills of Steve Jobs were instrumental in building the firm’s brand identity. Although his successor Tim Cook may have some difficulties filling his shoes, he is just as active when it comes to defending the company’s interests. The New York Times called him “the tech industry’s top diplomat”: he personally warned Trump that trade pressure on China could harm the sector, and reportedly got assurances from the president that iPhones assembled in China would not be subject to tariffs.
He has also engaged in addressing consumers – one of his key messages underlined that Trump’s policies won’t affect Apple clients, and he told CNN that he was “optimistic” about the future. Speaking on the day of Apple’s Worldwide Developer’s Conference, Cook also said that disputes of this kind are never a good idea: “No one will win from that. It will be a lose-lose. And I think that when the facts are so clear like that, I think that both parties will see that and be able to work things out.” He further developed his views in an interview with the US National Public Radio, in which he said that protectionism harms economic prosperity.
Meanwhile, the automotive industry will be one of the main victims in the trade war. As displayed in the chart above, five from the 10 most mentioned brands in the trade war coverage stem from that sector: Harley-Davidson, BMW, Ford, Daimler, Ford and Tesla.
Harley-Davidson wants to move some production of its motorcycles away from the US in response to the retaliatory EU tariffs, and said that will absorb the additional costs rather than passing them on to customers: “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” the company said.
Ford, Tesla, BMW and Mercedes maker Daimler, which produce their cars in the US and export them to China, will also take a strong financial hit. BMW cautioned that deepening the trade row would be harmful for stakeholders, and added in a statement that it stands for free trade worldwide.
BMW spokespersons have emphasised this by telling the media that the company built over 371,000 vehicles last year, of which 70% were exported, and explained that barrier-free access to markets is a key factor not only for the car maker’s business model, but also “for growth, welfare and employment throughout the global economy”.
In contrast, Daimler has not provided specific export data, but commented: “We don’t speculate about ongoing negotiations. We are of course monitoring the situation closely.” In the meantime, a Ford spokesman said: “It’s essential that governments work together to lower, not raise, barriers to trade. We encourage both governments to continue to work together through negotiation to resolve issues between these two important economies.”
Tesla has not shared this focus on the global prosperity, which is central in the other car manufacturer’s statements. It became the first automaker to raise prices in in China in response to the trade war, and before that, CEO Elon Musk tweeted at Trump, saying that China’s import tariffs and joint venture practices are unfair. The company has not commented after the price hike, but Bloomberg reported that Musk is expected to visit Shanghai.
In the meantime, construction machinery company Caterpillar, often deemed bellwether for the American industry, has seen a sharp decline in its shares. The stock started trembling when, during an earnings call, the company’s Chief Financial Officer Bradley M. Halverson said that „the outlook assumes that first quarter adjusted profit per share will be the high watermark for the year” – a comment which spooked investors. The situation got worse when he started talking about the price versus material costs equation for the rest of 2018.
The company’s annual forecast did not mention geopolitical threats, but in its 2018 report, it cautioned that “buy national” policies or retaliation against such policies could have negative effect on business.
In the meantime, Amazon was singled out as the tech company which might be affected by the trade war, and many journalists put this is the context of Trump’s “obsession” with the e-commerce platform. The president has repeatedly blamed Amazon for taking unfair advantage of the US Postal Service, and has a personal feud with CEO Jeff Bezos, who is also the owner of The Washington Post, a newspaper whose criticisms called down Trump’s anger.
Both Caterpillar and Amazon have not addressed the trade war directly, and many other companies are yet to design more sophisticated communications strategies in response to the dispute’s aftermath: for instance, they will have to deal with the eventuality of products getting more expensive.
Firms can reinforce the confidence in their brand if they emphasise their ways of protecting consumer’s spending power – for instance, Harley-Davidson is doing this by highlighting that it will absorb the additional costs from the tariffs instead of passing them on to buyers. However, if they are unable to do this for financial reasons, PR teams would probably try to take control by turning price hikes into rebranding strategies.
The political and economic tension would be a great test for the creativity and flexibility of many communication executives. They would need to up their game not only when it comes to public relations, but also when investor and even retail relations are on the agenda, and they would have to demonstrate a secure grip on the situation on all three fronts.