By Selina Wang
Chinese internet companies face a new reality after Donald Trump’s surprise victory as U.S. president-elect — and Alibaba Group Holding Ltd. has the most to lose.
On the campaign trail, Trump promised to upend global trade, saying that China is “killing us” on trade policy and proposing tariffs on Chinese goods of as much as 45 percent. If implemented, his ideas could lead to “devastating” results, from global trade wars to higher costs of living, and “spell the end of globalization,” according to Darrell West, a vice president at the Brookings Institution.
“He was very critical of Chinese trade agreements and has threatened to rip them up,” West said. “If he did that, the consequences for Chinese companies would be enormous.”
Of China’s web giants — including Baidu Inc., Alibaba and Tencent Holdings Ltd. — Trump’s trade policies, if implemented, are likely to pose the biggest threat to e-commerce operator Alibaba. While Baidu and Tencent focus on the domestic Chinese market, Alibaba has a significant part of its business tied to trade in the U.S. Higher tariffs on Chinese goods would depress demand for its AliExpress site, where Chinese retailers sell to U.S. consumers. Ensuing trade disputes could hurt sales on its Tmall platform, in which U.S. and international brands sell to Chinese consumers.
“Given the direct and indirect risks, the election probably has the greatest impact on Alibaba more than any Chinese internet business,” said Gil Luria, an analyst at Wedbush Securities Inc. “If there are disruptions in trade, it would impact the willingness and likelihood of U.S. brands and retailers to take an active part on Tmall.”
Alibaba Vice Chairman Joseph Tsai urged the president-elect to really focus on relations with China, a vast market for American goods that could create U.S. jobs as its economy grows. Tsai, a lieutenant to Alibaba co-founder Jack Ma and one of the country’s more prominent business leaders, urged Trump not to adopt an isolationalist doctrine, particularly with the world’s No. 2 economy.
“The relationship between China and the U.S. will define our century,” Tsai told reporters in Shenzhen on Thursday as the company prepared to launch its annual 24-hour Singles’ Day online shopathon. “If you don’t have Chinese consumers being engaged and buying American products, and Chinese investors can’t invest in the U.S. and create more American jobs, then you’d be in trouble.”
Alibaba’s management has said that its primary short-term focus isn’t consumers in the U.S., and that it is trying to gain share in developing markets first. Trump’s presidency will probably solidify Alibaba’s decision to target U.S. consumers in the longer-term, according to Luria.
Yet Trump’s policies could upset Alibaba’s plan to act as the gateway for international retailers to reach Chinese consumers. If new policies caused China to retaliate and raise tariffs on U.S. goods, that could hurt Alibaba’s Tmall sales in China, Luria said.
“A positive relationship between the U.S. and China is important for the world,” an Alibaba representative said in a statement. “We believe Alibaba is doing our part by enabling U.S. businesses — large and small –- to access the China market, creating American jobs and economic opportunity.”
Investors were already skeptical of Alibaba’s growth prospects, as China’s largest e-commerce company faces a slowing domestic economy. Trump’s imminent presidency only compounds those fears. The company’s stock fell 3.2 percent in New York on Wednesday to $96.67. The Chinese economy could fall into a deeper recession if Trump enacted trade sanctions, hurting the domestic consumer demand that Alibaba relies on.
If China and the U.S. don’t work together, “it’s going to be a disaster,” Chairman Ma said in an interview with CNNMoney on Wednesday. The billionaire said he is hopeful that Trump won’t carry through with the threats he made during the campaign.
Trump’s presidency also may limit the ability of companies like Alibaba to bring talent from China to work in the U.S., according to West. Trump advocated for stricter limits on immigration during his campaign — it’s unlikely that he would expand the H-1B visa program, which is aimed at foreign workers with specialized skills. Some firms in America may see the citizenship of its potential hires as a more important consideration than other qualifications if it becomes difficult to ensure that foreign workers will be welcome.The big question for technology companies and investors is how many of Trump’s words he will put into action, West said.
“I think everyone is rethinking their strategy because no one is sure what a Trump presidency will look like.”
Silicon Valley Reels After Trump’s Election
Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.
Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products, and that the miscalculation would cost the industry, and the world, greatly.
Tags: Alibaba Group, AliExpress, Alphabet, Amazon, Apple, Brookings Institution, Chinese companies, Chinese consumers, Chinese goods, Chinese Internet companies, Chinese investments, Chinese money, Donald J. Trump’s election, Donald Trump, Eric Schmidt, Facebook, Foreign Workers, Google, H-1B visa program, immigrants, immigration, Jack Ma, Microsoft, Sherpa Capital, Shervin Pishevar, Silicon Valley Reels After Trump’s Election, Sundar Pichai, Tmall, Trump, U. S.