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The challenges and coping strategies of the enterprises behind the international trade war

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The challenges and coping strategies of the enterprises behind the international trade war

For all enterprises engaged in international trade business, whether they are large multinational groups, multinational enterprises, or small and medium-sized cross-border trading companies, they rely to a largely extent on their country’s preferential and exemption policies to reduce costs to a certain extent. At the same time, they also rely on high-quality cooperation with excellent domestic or international parts suppliers to produce competitive products.

However, when considering the situation of an individual country, policymakers usually focus on the development of their own country in the interests of the whole. They may formulate certain restrictive measures to ensure the application of domestic professional products and technologies, or to ensure the continued development of related industries and to prevent foreign projects from impacting the country’s industrial technology, economic environment and labor market.

The term “Trade Barriers/Barrier to trade” probably first appeared around the 19th century. The earliest real-world applications in the real sense mainly occurred between the two world wars. The Great Depression at that time led to countries generally adopting trade practices. protectionism.

Over the past few years, laws and regulations formulated by various countries to combat trade protectionism have continued to emerge. In particular, the legal scope of some countries is not limited to domestic business, but also restricts and hinders the business activities of other countries. It has even evolved from initial protectionism into one after another economic war without gunpowder. Behind the economic war are the problems of life and death faced by enterprises in various countries. Trade protection is a double-edged sword, which can also cause harm while protecting. Large multinational companies usually have stronger capabilities and backgrounds and can break free more quickly and with less repercussions. For small and medium-sized enterprises whose survival is based on international trade, they cannot easily change direction, nor can they compete with the policy power of big countries. What is even more worrying is that some policies are being applied and implemented under other names. So, how companies, especially small and medium-sized enterprises, survive and how they use legal weapons to protect their rights and interests has become an issue worthy of global attention and serious consideration.

Identify economic behavior
Under the guise of “anti-corruption”, it is actually a secret “economic war”.

In recent years, some countries have investigated large multinational companies in the name of “anti-corruption” and forced them to pay huge fines. What’s more, Alstom, a French multinational company whose main businesses are railway transportation and energy, was forced to sell important strategic businesses after being investigated and restricted in the name of “anti-corruption.” Behind this is not only the dismemberment of Alstom, but also the country to which it belongs will lose its right to speak in the energy field. This is essentially an economic war at the national level.
In addition, in the current trade war between major powers, Meng Wanzhou, who has been detained in China, and Huawei and ZTE, who have been sanctioned, are ostensibly complaining about the inequality of trade between countries, but in fact they are trying to curb the rise of technology and high-end manufacturing in developing countries.

Under the guise of “freedom and democracy”, the powerful can do anything.
Whether it is film and television works or media reports, certain countries always flaunt themselves as “freedom and democracy.” The impression given to us by these so-called free countries is that even the lowest vulnerable groups can obtain judicial asylum and pardon. So much so that when the author was first detained, he naively thought that everything was a misunderstanding and that he would be released soon.
In the above case, even though the party’s business in Indonesia many years ago was only a project with a small amount involved, and he was only an insignificant participant in the incident that year, he has fallen into the hands of those who implemented economic sanctions. Forced to become a bargaining chip in negotiations. After many appeals and court hearings, the agreement reached was easily reversed. As individuals, we have no choice but to accept it. The result of resistance will only be a heavier punishment. In prison, no matter how legitimate the author’s request, it can be ignored and dismissed using “procedure” as an excuse. Under the power, individuals are so powerless and weak.

How to survive, how to win
China is the world’s manufacturing powerhouse, and most of the goods the United States imports from China contain value created elsewhere, including in the United States. That is to say, the circulation of these products does not only benefit the two destination countries. For example, most of the value of iPhones imported from China include displays from South Korea, chips from Japan, and U.S. design and software. Therefore, every dollar of lost sales by a Chinese company actually affects the Chinese economy by less than a dollar. In the computer and electronic products industry, which accounts for the largest share of China’s exports to the United States, China adds about 50 cents of value to every dollar of U.S. imports. Therefore, the negative impact of tariffs on China’s manufacturing industry is unlikely to be large enough to have a significant impact on China’s trade practices.

Some large listed companies have saved themselves through transformation, such as developing financial derivatives business to achieve the purpose of hedging, including locking in costs and avoiding risks such as interest rates and exchange rates. These derivatives are matched to the size and direction of their underlying businesses. For example, an import and export company began to invest in foreign stock markets and use currency exchange transactions to reduce exchange rate shocks. However, this is still limited by the size and capabilities of the enterprise. Not all companies can find a suitable direction for transformation, and some industries are not suitable for such changes. If changes are forced, not only will it not be able to help the company get out of adversity, but it will also have a chain impact in severe cases.

Case discussion
As the trade war escalates, China has taken countermeasures as its space has been squeezed smaller and smaller. For example, in a round of retaliatory tariffs, China avoided cracking down on imports that supplied raw materials for foreign-owned factories at home. This helps cushion Chinese manufacturers and foreign investors from the impact of the trade war. Chinese government policies have been announced to make it easier for foreign investors to enter banking, agriculture, automobiles and heavy industry. Tesla, the world-renowned electric car giant, has become the first foreign automaker approved in China without the need for local partners. It will establish a wholly owned factory in Shanghai to produce electric vehicles. These actions send a strong signal to investors that China will continue to cooperate with international partners even in the midst of a trade war.

The complexity of international trade, whether manifested through trade protectionism or economic warfare, highlights the multifaceted nature of the global financial landscape in the era of globalization. These phenomena are a profound reminder that every country must prioritize economic security while pursuing its development agenda. Globalization has undoubtedly promoted the expansion of international trade and economic growth, but it has also brought inherent risks and challenges. Therefore, countries must remain vigilant and adopt strong risk management measures to safeguard their economic interests.

In dealing with the intricacies of globalization, every country must recognize the duality of its effects and adopt a balanced approach to economic development. While globalization offers unparalleled opportunities for market expansion and collaboration, it also creates complex challenges, including increased competition, regulatory uncertainty and geopolitical tensions. Therefore, prudent policy making and proactive risk management are crucial to mitigate potential risks and harness the benefits of globalization.

For business owners at the nexus of global development, these developments are a constant reminder of the need to remain vigilant and adaptable in the face of changing market conditions. The changing landscape of global financial markets requires a deeper understanding of their complexities and risks. By developing a nuanced understanding of global economic dynamics and taking proactive steps to guard against potential pitfalls, businesses can strengthen economic security and sustain long-term growth.

Additionally, the inevitable pitfalls and challenges of life and work must be acknowledged. Whether they stem from external forces or internal factors such as lack of knowledge or greed, these pitfalls are valuable learning opportunities. Rather than giving in to fear or giving in, individuals and businesses should face these challenges head-on and glean valuable insights from their experiences. Through proactive adaptation and continuous learning, the pain and lessons of pitfalls can be transformed into catalysts for positive development and growth.

In short, as we deal with the complexity of the global financial landscape, countries and businesses must adopt a prudent and forward-looking attitude. By prioritizing economic security, adopting risk management measures and leveraging lessons from the past, we can navigate the tide of globalization with resilience and foresight, ensuring continued prosperity and growth for all stakeholders.

Frédéric Pierucci. 04.2019. The American Trap: My battle to expose America’s secret economic war against the rest of the world. CITIC Press Group.

MARY E. LOVELY. August 10, 2018. How China will win the trade war. The New York Times. Read on 22.2.2024. https://cn.nytimes.com/opinion/20180810/trump-tariffs-china-trade-war-who-will-win/

Xu Jing/ Zhang Jingdong. 23.09.2019. “Focus” Chinese foreign trade companies under the Sino-US trade war: How to turn crisis into opportunity and maximize value preservation? Reuters. Read on 27.02.2024. https://www.reuters.com/article/idUSKBN1W801L/

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