A war is a war! No matter the amplitude, a conflict automatically implies casualties. This is the case with the recent trade war that president Trump seems bent on against China. Location is irrelevant: whether you’re a US, European, Chinese or Australian citizen, this conflict has the power to affect you just the same.
We’ve been talking about globalization for decades and every business is now deeply rooted in exchanges with other markets and countries. Front-row examples, such as Amazon & Shopify, are now holding their breath in an expensive wait to see where this conflict is going. And there’s a chance it could turn into a financial bloodbath. In such a scenario, where the US & China start applying all sorts of punitive taxes, we’re going to witness chain reactions that will result in a mass of collateral victims.
The taxes-on-top-of-taxes tactic will drive to a significant drop in consumption and businesses worldwide stand to lose. Besides the consumption decrease, third parties that sustain the economic ecosystem will start feeling the pressure of a burdened trading industry as well. And, if the large corporations have backup plans to pull through a crisis, many of the small and medium-sized entrepreneurs might not be so lucky.
A growing number of economic hypotheses speculate that an all-out war with China will bring US industries (the tech sector in particular) to their knees. Let’s talk facts: think about steel and all other production materials used by the American industrial sector – a retaliation move from China has the potential to cripple many US suppliers, forcing them to downsize or, even worse, close up shop altogether. True, China will consequently be in a position of making massive investments in order to develop a new infrastructure able to feed its needs. But, China might just be capable of such a feat and, if it does, imagine the tremendous independence this significantly large country stands to gain. US businesses would receive yet another blow in terms of international coverage.
We all heard the phrase “clear and present danger” associated with this trade conflict. If trade with China is (indefinitely) put on hold, the costs of American goods will, as a result, get quickly rise making them unappealing to the targeted markets. As a direct reaction to a price increase, buying behaviors will move to favor providers that are able to keep production costs and market demand in balance.
This will translate to an array of business strategy changes, all focused on cost-cutting and loss aversion, with frozen business development as an immediate effect. At the macroeconomic level, frozen business growth means frozen economic development.
eBusiness, Real Trouble
When one starts thinking about the effects of such a war, coupled with the fact that our society has become highly digitalized, one cannot but see the empty half of the e-commerce glass. Just like their brick-and-mortar counterparts, online businesses will also be forced to redirect attention to different segments that can support overall costs cuts. Enter: offshore options. Lower taxes facilitate lower prices (in conjunction with higher volumes) and, ultimately, a sustainable business model.
Crisis situations put a huge strain not only on production and pricing but on marketing strategies as well. The rule any marketer lives by is the all-might KYC, Know Your Customer. Selling things without knowing your consumer is just like fishing for trout in a pond of carps. Especially when it comes to online businesses, marketers know that any and all KYC methods are deeply rooted in correct product keyword analysis. And rightfully so! Understanding what your customers search for, the roadmap to product awareness and loyalty, their buying motivators and repeat business patterns; these are the crucial tools of digital marketers.
Let’s make it clear: there will be no real winners in this war – it’s the perfect lose-lose situation, the nightmare scenario for any business owner. In order to survive companies need to consolidate all the segments of their operations, push their resources to unfamiliar limits and optimize cash flow cycles like never before. Looking for better alternatives in terms of suppliers & manufacturers, testing new markets & digging for go-to-market strategies are also excellent ideas, especially if you want to build a thick buffer to lean against in case of a serious market disruption.