The coronavirus epidemic has put the world under lockdown. Borders are closed in most parts of the world and trade has slowed.
Covid-19 is also bringing some memories back from the last year when the US-China trade war led to a slowdown in the trade between the world’s top two economies.
In 2019, US-China trade dropped to US$558 billion compared to US$660 billion in the previous year.
While the trade war seemed at least partially resolved at the end of 2019, it might be on its way back to haunt the global economy.
Trump is back with tariff threats
US President Donald Trump has against threatened to impose tariffs on goods and services originating from China.
In recent weeks, Trump has increased his anti-China rhetoric, triggered by unverified reports that the novel coronavirus originated in a lab in Wuhan.
The Trump administration is also redrawing supply chains away from China.
What does it mean for the tech industry?
The last years’ trade war was fought on multiple battlegrounds. However, tech, retail, and agriculture were three main areas of focus. Specifically, Huawei was in the flashlight of the trade war last year.
Trump wants to bring manufacturing jobs back to the US. China has been the world’s factory for tech products like mobile phones and computers.
Trump even directed companies to stop doing business with Huawei, forcing Google to suspend ties with the world’s biggest manufacturer of cell phones.
If the trade war comes back, technology companies are going to be the first ones to suffer from it.
Last year, Apple Inc (NASDAQ: AAPL) was pondering on moving up to 30% of its production away from China. Microsoft Corporation (NYSE: MSFT), HP Inc (NYSE: HPQ), and Dell Technologies Inc (NYSE: DELL) were some other American tech giants preparing a China exodus. Trade War 2.0, coupled with the coronavirus crisis, may accelerate the move.
Retail under fire too
Just like tech, made in China non-tech goods also dominate the shelves of supermarkets around the world.
If the manufacturing of such goods, especially the discretionary ones, moves away from China, it will impact the global retail industry.
Those goods, if produced in developed countries, would get costlier, hampering consumer spending.
On the other side, tariffs on American goods will affect the demand for imported products in China. This will affect retailers and e-commerce companies like Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988).
While the current coronavirus crisis appears to be an opportunity for e-commerce companies, Alibaba may have to worry about the resurgence of the trade war. The trade war will also suppress economic growth further, affecting retailers.
China’s delisting worries
Perhaps, the bigger threat to Chinese companies listed in the US is the threat of having to delist. Last year, Bloomberg reported that the Trump administration was mulling delisting Chinese companies listed in the US.
Alibaba, which was not yet listed on Hong Kong Stock Exchange back then, hastened its plans to do so thereafter. Baidu Inc (NASDAQ: BIDU) and Alibaba rival, JD.com Inc (NASDAQ: JD), are also considering a secondary listing in Hong Kong.
Foolish conclusion
If Trade War 2.0 materialises, we will see the technology and retail industries coming under pressure.
Investors may also see Chinese companies rushing to get listed in Hong Kong.