I recommend you read a just out Reuters article on U.S. China trade. It does a better than average and fairly thorough job setting out what we can expect in China-United States trade relations. The article is entitled, “US and China on collision course for trade war? It is subtitled, “The problems Americans are seeing with their economy are only going to get worse as China rises.”
1. The article seems to view as a bad thing that American multinationals are profiting from China. The article talks of how multinationals are making short term profits from China at the expense of their American employees and their own long term profits. I do not disagree that this can be the case, but I find it curious that they would lump Yum Brands in with this and seem to complain about how Yum Brands (owner of KFC, Pizza Hut, and Taco Bell) now reports 75 percent greater profits in China than in the United States. I would contend that Yum Brands making money in China is a flat out good thing for its United States employees and for the United States as a whole.
2. The article talks of Henry Nothhaft, CEO of Tessera Technologies, who says “most innovation occurs on the factory floor, so he worries that American innovation will slide with the erosion of the country’s manufacturing base.” I have to admit that had never even occurred to me until now, but it does make sense.
3. The article ignores how U.S. companies manufacturing overseas can actually both save and create American jobs. Forbes magazine did a great article, entitled, “One Way To Save U.S. Manufacturing,” on a specific micro-example of how this can happen, using one of my clients, SmithCNC, as the poster child.
What do you think?