No end game in sight for trade war, China business expert warns

"I see Israel in a position of having to choose between America and China," said McGregor.

By EYTAN HALON
APCO Worldwide Greater China chairman James McGregor (L) and MAI Foreign Trade and International Relations director-general Dan Catarivas (R) (photo credit: ISRAEL ASIA CENTER)
APCO Worldwide Greater China chairman James McGregor (L) and MAI Foreign Trade and International Relations director-general Dan Catarivas (R)
(photo credit: ISRAEL ASIA CENTER)
An end game for the raging trade war between the world’s two largest economies is not in sight, a leading US-China business expert has warned.
“The American business community welcomed [US President Donald] Trump’s pushback, but it has gone in so many directions – we don’t see where the end game can be now,” said James McGregor, chairman of consulting firm APCO Worldwide’s greater China region, during a visit to Jerusalem on Tuesday.
Addressing an event organized by the Israel-Asia Center, the Shanghai-based businessman and journalist said the American business community would welcome a solution to the trade tensions, but that China “doesn’t know what to do, and which tweet they are negotiating with.”
Amid fierce rhetoric between the sides, McGregor expressed his belief that an interim agreement “where both sides can claim victory” will be necessary in order to find a basis for productive talks.
With the United States and China currently representing Israel’s two largest export markets, questions have been regularly raised over whether it remains possible for Israeli entrepreneurs to develop business ties with the trade war belligerents.
“I see Israel in a position of having to choose between America and China,” said McGregor. “Unfortunately, there are a lot of countries now asking this question, including in South East Asia and other countries where there is tension.”
Under pressure from Washington, Israel’s security cabinet approved the establishment of an advisory committee to vet foreign investments last month.
The purpose of the committee will be to provide a mechanism for regulators to take national security considerations into account when reviewing transactions in sensitive sectors, including in communications, infrastructure, finance, energy and transportation.
“The Americans are trying to build an alliance with a lot of countries, asking them to make a choice: America or China,” said Dan Catarivas, director-general of Foreign Trade and International Relations at the Manufacturers’ Association of Israel (MAI).”The current administration maybe feels uncomfortable that Israel, a major ally, does not step in line with stopping the so-called Chinese expansion. We have to understand the sensitivity of the Americans, and we have to balance it with our own national interests. We need a dialogue with the Americans and see the line that we shouldn’t cross – we don’t know exactly where that line is.”
When companies considering Chinese investment turn to the MAI, Catarivas says he advises them to be careful.
“There is more and more incompatibility of working both with China and America. Some will find it incompatible to have Chinese investors if their major market is the United States,” said Catarivas, who previously served as Israel’s first economic counselor in Beijing. “Israeli companies increasingly have to make up their minds. Either go for China, meaning quantity, or America, which goes for quality rather than quantity. China is now also seeking quality, not just quantity.”
One unintended and “very worrying” consequence of the trade war, McGregor added, is the increasing decoupling of major American hi-tech companies from the United States.
The most powerful American tech companies also boast the largest market share in China, and are eager for long-term business stability and expected decades of continued growth.
“Companies are looking at how to get their more valuable parts offshore, so they can’t be blocked by presidential orders. You’ll go out of business if you can’t sell to your largest customers,” said McGregor, highlighting that the sale of Intel-manufactured chips dominate Israel’s exports to China.
“[Companies] are looking at their manufacturing chain, the highest-value tech part, and looking at moving it out of America. There isn’t a lot of talk about this, but it could be a very unfortunate, unintended consequence of this trade war.”