In the United States, shoppers are gearing up for Black Friday and Cyber Monday. But in China, the shopping bonanza, Singles Day, just ended. All of this consumer activity fueling growth, connecting consumers to the goods they want and the flurry of profitable international trade, is threatened by the ongoing trade war.
For all of President Trump’s clamoring about winning, in the end consumers, like those cashing in on November deals on both sides of the planet, lose.
With the numbers in, the sales on Nov. 11 (dubbed Singles Day because of all the 1’s in the date written 11/11) brought in more money than Black Friday, Cyber Monday, and Amazon Prime Day combined. That means that more people are online, more people have access to the goods that they want, and that the trade war hasn’t yet brought the crushing economic pain that President Trump desperately seems to want.
Despite trade war fears and a slowing economy, consumers throughout China were still buying up online cartloads of items while a girl group sang an aptly named song “Wanna Buy Wanna Buy” as part of the carefully choreographed spending frenzy. By the end of the 24-hour marathon shopping event, Alibaba posted a record $30.7 billion in gross merchandise value.
For comparison, Amazon Prime Day in 2018 brought in around $4 billion, and in 2017 over the five-day period from Thanksgiving through Cyber Monday, consumers spent $14.05 billion online. China’s Singles’ Day is easily the winner.
But this rosy picture was tempered by other numbers from Alibaba, the company behind the whole thing. Although sales increased from 2017, the growth rate slowed from 39 percent to 27 percent. That also reflected in the company’s share prices, listed under BABA, which fell on Monday, even after record breaking sales numbers.
With more Chinese consumers online each year, there are fewer new logins to boost sales contributing to high growth. Moreover, even though Alibaba posts sky-high numbers for Singles Day that seem to blow its competition abroad out of the water, the use of gross merchandise value as a metric doesn’t make for an apples-to-apples comparison with sales, so it’s not quite as impressive as it seems.
Alibaba, like China as a whole, will be hard-pressed to keep up the growth rates that were made possible as the country rapidly industrialized. But that eventual decline in growth is compounded by the tit-for-tat trade war raging between China and the United States.
Trump is right to point out that that this will hurt the Chinese economy. But he fails to appreciate that it will also hurt the United States.
When the end of the month comes around and U.S. consumers look to cash in on post-Thanksgiving deals, it won’t just be China that looks at waning numbers. Consumers on both sides of the Pacific will realize that prices on the items they want have inched up with new tariffs slowing growth.
More worryingly, this holiday season is likely only to be the start of higher prices for shoppers. If Trump and Chinese President Xi Jinping fail to reach a deal, then tariffs are set to increase, this time hitting almost all consumer goods coming from China.
The solution to this is fairly straightforward: Get rid of the tariffs and let people shop. It’s good for business, good for consumers, and great for U.S.-China relations. And if the White House wants to push China on policies it doesn’t like, it has plenty of other options that don’t impose blanket economic pain as consumers fill real or virtual carts.
