The hardships endured by South Korean corporations Hyundai Motors and Lotte Group in China following the 2017 THAAD debacle is an old, clichéd example of Chinese nationalism at work. But the results of the Brunswick Group’s recent consumer-focused report could offer a fresh warning to U.S. companies — including luxury brands — about the perils of operating in China during a dragged-out trade dispute.
The ‘U.S.-China Trade Tracker’ surveyed 1,000 Chinese and 1,000 American consumers in early June across areas that included the perception of companies by nationality, factors affecting consumer trust, and consumer sentiment surrounding trade negotiations. And the reason American companies should be concerned? The unfavorability of U.S. companies amongst the surveyed Chinese consumers reached 42 percent — a high number that’s similar to Chinese sentiment towards Japanese (43 percent) and South Korean (47 percent) companies. Japan and South Korea have turbulent geopolitical relationships to China that have ultimately manifested in economic pushback from the world’s largest consumer market.
“Chinese consumer sentiment toward U.S. companies has taken a turn for the worse,” says Peter Zysk, Director of Brunswick Insight’s China practice. “The fact that American companies are now ranked in a similar tier [to Japanese and Korean companies] should worry U.S. businesses.”
While the intensely adversarial nature of the U.S.-China economic relationship is hardly new or surprising, the hardening of anti-American sentiments is a more recent development. Indeed, 68 percent of consumers acknowledged that increasing trade tensions had negatively impacted their perception of U.S. companies. For American luxury brands already engaged in stiff competition with their European counterparts, the shift in public opinion, in addition to the likely loss of price advantages, could prove costly.
These changes are the product of a Trump-Xi standoff that has deepened in recent months with both leaders announcing tit-for-tat tariffs. Analysts looking to understand the potential ramifications of such hostilities have largely focused on market fluctuations, government announcements, and the fortunes of key affected industries. As such, Brunswick Group’s report is a timely indicator of Chinese consumer sentiment and one of the first to have been conducted since the trade dispute began in July last year.
“This is a challenging time for American companies,” says Zysk. “[However] Chinese consumers hold a substantially more positive image of American companies than of the US government… US firms must carefully consider the role they play in trade tensions.”
Stirred by patriotic sentiment, and hawkish national media — exemplified by Kang Hui’s viral anti-American tirade on state television in mid-May — 56 percent of Chinese consumers admitted they’d avoided buying a product made in the U.S. “to support my country’s position in the trade war.” In addition, 41 percent claimed to have veered away from US products on account of tariff increases. For American luxury brands, this could prove significant in pushing expensive goods beyond the reach of aspirational Chinese consumers.
When viewed alongside the 77 percent of Chinese consumers who admit to regularly buying American goods, there is a long way for U.S. companies to fall and a substantial bottom-line risk in what has long been considered a major growth market. A boycott may have yet to arrive, but it remains a sincere possibility, and U.S. companies must hope a negotiation happens sooner rather than later.
“There is broad support for bilateral trade in both countries,” says Zysk. “Few believe a trade agreement will be signed in the next three months, but majorities [on both sides] believe a deal will be reached within the next year.”