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Corporate America in the Crossfire

The US may have a trade deficit with the rest of the world, but its multinational companies have a major surplus when it comes to sales in foreign markets – especially China. If the US-China trade war continues to escalate, these firms will be, as US President Donald Trump might put it, the biggest losers.

HONG KONG – American multinationals may like the idea of forcing China to alter the policies and practices – from subsidies for state-owned enterprises to the requirement that foreign firms share proprietary technology in exchange for access to the Chinese market – that place them at a competitive disadvantage. But, as US President Donald Trump’s trade war continues to escalate, it is worth asking: What price are these companies really willing to pay?

The post-World War II world order has been undergirded by three overlapping networks of global exchange – trade, investment and finance, and information – which US multinationals have played a leading role in developing. In 2017, global trade in goods and services was worth $46 trillion, or 57% of world GDP. Annual turnover in global foreign exchange was 22 times larger, partly owing to lower transaction costs.

Lately, however, it is flows of data and information that are skyrocketing. According to research by the McKinsey Global Institute, by 2016, digital flows were having a larger impact on GDP growth than trade in goods. Such flows include information and ideas in their own right, as well as digital components of cross-border transactions involving goods, services, or finance.

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