Tim Cook, Golden Boot, Xi Jinping, Election 2018

Marc Ross Weekly
June 24, 2018
Curation and commentary from Marc A. Ross

Reporting from Alexandria, Virginia

Marc Ross Weekly  = Commentary + Analysis at the Intersection of Global Politics + Policy + Profits

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THREE QUESTIONS

1) Who will win the Golden Boot?

2) Michael Bloomberg plans to spend over $80 million on midterms and help Democratic House candidates, will it make a difference?

3) Gallup figures show most Americans work more than 40 hours a week (the average is 47) and 18 percent work more than 60 hours, how will this trend impact upcoming American elections?

GLOBALIZATION

Tim Cook - Tech's top US-China diplomat

As the US-China trade war smolders, Apple is concerned it will be caught in the middle between powerful interests in Washington and Beijing.

This public affairs environment has led Tim Cook to play diplomat and moved Apple to court China ever more closely. 

Cook's efforts to play diplomat haven't gone unnoticed. Even supply chain partner Foxconn now refers to the company as "Red Apple." 

The New York Times reports, Apple’s China business has grown far more significant than anyone on either side of the Pacific could have anticipated - even the optimists in Cupertino didn't expect this level of success. With 41 stores and hundreds of millions of iPhones sold in the country, there is arguably no American company in China as successful, as high-profile, and with as big a target on its back. 
 
This success in China is a core part of Tim Cook’s legacy. People close to him say his deep China supply chain experience was a massive help in managing China’s bureaucratic and nationalist government.

This business success and commitment to the Chinese marketplace has propelled Apple to be the top businesses diplomat and is the leading corporate to manage the US-China commercial relationship.

Apple realizes America's government wants big tech assembly plants for employment, and China's leaders want R&D investment in innovation. 

Last month Cook visited the Oval Office to warn President Trump that tough talk on China could threaten Apple’s position in the country. In March, at a major summit meeting in Beijing, he called for “calmer heads” to prevail between the world’s two most powerful nations.

The article reports, citing a source, Trump told Cook the US government would not impose tariffs on iPhones assembled in China.

Can "Red Apple" be the key to moving the US-China commercial relationship forward?

DISRUPTION

What global business needs to know about Xi

Earlier this year, Chinese Communist Party big boss Xi Jinping broke with a 25-year tradition by unveiling a new senior leadership group that includes no clear potential heirs, ensuring he will stay in office beyond 2022 and securing a lifetime appointment.

The consolidation of power in the hands of one man is a departure from the collective leadership that guided China through decades of historical and impressive economic growth and consumer stability. Today's top leadership reveal is a return to China's cultural code of imperial command.

What does it mean for global business? 

How will he use this power? 

Does the C-Suite commit or retreat?

As always, global business and the Davos crowd hopes a stronger Xi will now be able to push through bold economic and financial reforms.

I don't see it.

Xi is beholden to China and not the shareholders of the world's Western-based blue chip companies.

Xi's new leadership enhancement does little to change the ethos that to invest and manage a business in China you need fortitude, patience, and need to think in China for China. Capital controls and other investment barriers remain, while debt soars.  

If you sell a commodity and consumer packaged good and service, all is well, and there will be continued access and success in the Middle Kingdom.

If you are a bank, a tech company, an oil exploration concern, a biotech startup, a developer of new energy vehicles, you best buckle-up. 

Your business model is seen as a challenge to where Xi wants to take China, and the Great Wall just got higher.

@carlquintanilla: Percentage of revenue from China:

* Deere: 8%
* Caterpillar: 9%
* Boeing: 11%
* Nike: 12%
* 3M: 13%
* Tiffany: 13%
* Starbucks: 15%
* McDonalds: 15%

(via @TheDomino) @CNBC @SquawkStreet

AMERICAN POLITICS

US voters split on whether tariffs are good for America

When it comes to tariffs and trade - a few campaign rules apply:

1) Where you sit is where you stand

2) Good politics rarely makes good economics

3) China, Brazil, France, Germany, Canada et al. don't have a vote in US elections

4) House elections are more parochial and micro, while Senate elections are broad-minded and macro

Earlier this week, Morning Consult reported thirty-eight percent of registered voters surveyed in the poll said tariffs on Chinese imports would help the US economy, compared to 42 percent who think they’ll hurt the economy. 

In a change of Republican ideology, Republican voters now are more likely to say the tariffs are good for the economy, with 59 percent saying they think they help the United States compared to 36 percent of independents and 21 percent of Democrats.

Regardless of what happens in the coming weeks, trade and tariffs will be an issue on the campaign trail in 2018 and 2020.

The battle between helping some against maximizing for all is the friction point.

Berlin and Beijing know this Amerian political struggle. No doubt teams of political scientists around the world are reading Politico, The Hill, and the Cook Report to determine where tit for tat tariffs will inflict the most pain at the ballot box for Republicans and Trump.

Jamian Ronca Spadavecchia, managing director at the consulting firm Oxbow Advisory and an adjunct professor at Middlebury College, said that the political risks for the administration are likely to be higher if US tariffs contribute to widespread inflation of consumer prices. “The strategy from the other side, whether it’s China or another country, to focus on congressional districts or agricultural products — I don’t know if that’s going to be that effective,” Spadavecchia said in an interview on Tuesday. “China is a big market, but it’s not our only market.”

Sure the tariffs provide a feel-good and sterling campaign trail talking point, but what is the end game?

It is to change business behavior and global commerce imbalances, or is politics for the sake of politics? 

“This is not about a policy,” said Mickey Kantor, the former commerce secretary and a chief trade negotiator for the Clinton administration, in a New York Times article. “This is not about asserting US leadership. It’s about the president having an impulse that if he does this, he will strengthen his base, send a signal to China, and be able to say  he’s been strong and tough.”

The expansion of tit for tat tariffs and reduced international commerce will stunt economic growth. Industries that require global supply chains and cross-border intercompany assembly will be profoundly affected, and pain could be substantial. 

Economists say the tariffs will drive up prices for American consumers purchasing products at retail stores as well as for businesses that depend on China for parts used to make other goods in the United States.

This increase in costs and losing markets is generating local headlines, but the feel-good, standing strong policy (personality) of Team Trump will keep trade and tariffs on the campaign trail in 2018 and 2020.

Plan accordingly.

Turnover in a President's senior staff after one year:

Trump: 34%
Reagan: 17%
Clinton: 11%
Obama: 9%
Bush Snr: 7%
Bush Jnr: 6%

HT: Brookings