(Bloomberg)—America’s corporate bosses could be excused if they don’t agree with President Donald Trump’s boasts that a trade war is “easy to win.” They can just reflect on the levers of pain China pulled against South Korean-owned businesses last year to imagine a state-nudged boycott against Starbucks or shutdown of Nike’s factories.
China vows to retaliate against all U.S. tariffs but hasn’t announced a response to Trump’s proposal to put duties on another $200 billion in Chinese imports next month. Since that’s more than the value of all U.S. exports to China, the Asian nation will need more than tit-for-tat tariffs to punch back.
If China employs a similar strategy to the one used when its neighbor installed a missile defense system—shuttering stores and factories owned by South Korean companies and stoking boycotts—a slew of U.S. brands could pay dearly. That’s because China is both an essential supplier and also the biggest growth market for many U.S. companies.
Here’s a rundown of some of the brands with a lot to lose:
Just last year, China showed that it wasn’t afraid to poke Nike when a program on state-run television criticized it for false advertising. That’s troubling for the world’s largest sports brand, which is No. 27 in the Internet Retailer 2018 Top 1000, because consistent growth in China stabilized Nike Inc. when it struggled to fend off competition in the U.S. Revenue in China surged 21% in the past year to $5.13 billion, growing to 14% of Nike’s total sales. Meanwhile, revenue in North America declined about 2%. And China is a major supplier, too, producing about one-fifth of its goods.
The toymaker is looking to China to help revive growth, including entering a partnership with e-commerce giant Alibaba Group Holding Ltd. last year. It also recently reached a deal to open learning centers in the country with a local partner that will integrate its brands, including Fisher-Price, into the curriculum. Mattel Inc. (No. 219), which also makes the Barbie and American Girl properties, last year said its China business could quadruple by 2020.
While many U.S. brands have been reducing risk in China, Michael Kors Holdings Ltd. (No. 295) in 2016 acquired direct control of its business there from a licensee. The division included more than 100 stores and about $200 million in revenue. The move was seen as a way to offset slowing sales in other regions. The luxury purveyor also makes a lot of its goods in China, with one manufacturing partner accounting for 20% of its products.
The shoe and handbag brand sources more than 90 percent of its goods from China, meaning any kind of serious disruption to its supply chain would have a huge impact. And while China is a small market at this point for Steven Madden Ltd. (No. 612)—it generates 90% of its revenue in the U.S.—the region is a source of growth.
“Long term, we remain very optimistic about the opportunity there,” Steve Madden CEO Edward Rosenfeld said last month on a call with analysts. “We’re going to ramp up marketing.”Favorite