- Multinational companies are deftly adapting to a less friendly global trade environment.
- A multilocal approach to business is putting multinationals closer to consumers.
- An uneasy truce in the U.S.-China trade war is promising, but uncertainty continues to cloud the long-term outlook.
As a portfolio manager who invests in many large, multinational companies, the most common question I get these days is whether I am worried about the impact of a global trade war. At a time when tariffs and other restrictions are threatening to reverse decades of trade liberalization, are these companies the most vulnerable of all?
The answer may surprise you: While I certainly follow political events, I am not overly concerned about the impact on well-managed multinationals. Simply put, they are the best-positioned companies to navigate an uncertain environment and devise effective solutions, including a multilocal approach to business that puts them closer to consumers around the world.
A temporary trade truce
When I first discussed this subject nearly two years ago, the U.S.-China trade war was just beginning to heat up. Since then, we’ve seen several twists and turns which ultimately led to a “phase one” trade deal adopted by Beijing and Washington on 15th January.
Clearly, this trade pact is a step in the right direction: China has agreed to buy more U.S. products while the U.S. reduces some tariffs on Chinese-made goods. However, we still have a long way to go before the world’s two largest economies address more thorny issues, such as intellectual property theft and heavy subsidies for Chinese state-owned enterprises. Those may take years, or even decades, to resolve.
In the meantime, companies that conduct business all over the world are doing what they do best: navigating treacherous waters and finding ways to succeed regardless of the geopolitical headwinds.