How to Take Advantage of the Trade War Between the US and China
In this article, you will discover 3 ways to seize the opportunities that a trade war is creating for Brazilian entrepreneurs.
To understand how these opportunities will reach you, it is important to grasp what lies behind the dispute between the US and China.
First, keep this in mind: the trade balance records the Export vs. Import relationship of a country…
When we talk about the world's largest exporting country, very few trading partners manage to run a surplus with them…
In other words, very few countries receive more money from them than they send.
After all, you are likely reading this on a computer or smartphone that was manufactured there…
You may be wearing a piece of clothing made there…
And even if I am wrong, that is fine…
Because I would bet that somewhere within your field of vision, there is something bearing the "made in China" label.
Each one of those items represents money sent to China.
It comes as no surprise that the US, China's primary importer, has maintained a trade deficit for years…
After sending out more money than they received, while directly contributing to China's explosive growth…
The US imposed a series of sanctions on Chinese products in an attempt to reverse this situation.
China retaliated in kind… and what began as sanctions between nations escalated into a trade war.
Up to this point, I can highlight two clear differences between our relationship with China and that of the US…
The first is that we are one of the very few countries in the world to run a trade surplus with China…
And the second is that…
It has been highly beneficial for us…
After all… Chinese demand for American products was not suppressed — it simply shifted direction…
And this is your chance to expand your business into a market up to 23 times larger than ours, through three different avenues…
Trade
Imagine the world's largest nation having access to your products…
Brazil's population consists of approximately 209 million people…
China is nearly 7 times larger, with 1.3 billion.
But that is not all…
China also has the world's second largest rail network.
And thanks to its geographic position and investments in the New Silk Road, it remains connected to Europe and the entire Asian continent by train.
In total, 5 billion people could receive your company's products at home.
This is a horizon 23 times larger, with up to 23 times more consumers than you are currently working with.
And freight would not be an issue…
Because while a shipment from Manaus to São Paulo — which takes two weeks — costs 20,000 reais…
Transport between two Chinese cities at the same distance takes six days and costs around 2,000 reais.
That is half the time, at just 10 percent of the cost.
Investments
But we are one of the most attractive emerging countries for investment.
Both the US and China view Brazil favorably, seeing real profit potential in our developing market.
Already, 60 billion dollars have flowed from China to Brazil as investments in our companies.
And they are watching Brazil right now, looking for the next great company to receive a significant injection of capital.
Technological Solutions
One of the driving factors behind China's growth is its mastery of technology…
Its expertise in optimizing processes means that production on Chinese soil can be up to 25 percent cheaper compared to Brazil…
Consequently, by leveraging China's solutions to reduce production costs, profit margins can be increased by up to 35 percent.
So if your profits have stagnated and you cannot achieve more competitive margins…
You probably do not yet have a commercial relationship with the Chinese.
And even if you choose not to — you will not be able to ignore them.
After all, we are talking about a nation that is a reference point in technology, and one that could revolutionize your industry segment at any moment — if not through you, then through a competing company.
As you can see…
All three ways of benefiting from this war between the US and China affect any Brazilian entrepreneur.
I feel confident in saying that relations with China are powerful enough to divide any segment of the Brazilian market into:
Chinese allies and non-allies.
Choosing the right side will be directly reflected in your company's bottom line.
Especially if your competitor chooses the opposite side…
In that case, your only chance of coming out ahead… is by choosing the right side.
So before you begin drafting plans that might work with the Chinese…
You need to make sure you understand the Chinese way of doing business.
One of the world's oldest nations — one that was never colonized, and whose customs are very different from ours…
You may have just one opportunity to:
— Bring new technologies into your company
— Attract investors
— Enter a new market
Are you ready to negotiate with the future world's leading superpower?
The plain truth is that we are talking about a country completely different from Brazil…
At 5,000 years old, this nation — which was never colonized — is one of the oldest societies in the world…
And it carries an extraordinarily rich cultural heritage that is decisive in business.
When it comes to China, cultural awareness is the single most important factor…
Because it shapes how people approach work, family, children's education, and the accumulation of wealth…
In short, culture determines how you fit into and relate to the whole.
Now, picture the following scenario…
You are heading to China… there is a meeting with a Chinese group, with the goal of:
— Establishing an exclusive new partnership for your company;
— Securing a multimillion-dollar investment;
— Or simply opening a sales channel in the Chinese market.
In any of these scenarios, you know that closing the deal will make your company a standout in your industry segment.
Regardless of what you do — even a micro-business can gain enormous advantages from a relationship with China.
Knowing this, you went to the meeting ready to close a killer deal… and you performed brilliantly.
You explained your projects, addressed all their questions, convinced the investors, and even drew a smile from the executive director seated at the table.
Satisfied with your performance, as you said your goodbyes…
You looked the executive director in the eyes, shook his hand firmly, and gave him 3 warm, enthusiastic pats on the back…
And never received a single call again.
You cannot understand what could have gone wrong… you were so close to closing the deal of your life…
But the fact is that you deeply offended him.
Like most Brazilians, you failed to respect an extremely decisive factor in negotiations with the Chinese: culture.
For example, a light handshake may be acceptable…
But never stare a Chinese person in the eyes, and never pat them on the back. That is offensive.
When negotiating with a Chinese counterpart, you are never seen as an individual — you are seen as a representative of your company and its entire culture…
Therefore, a single interaction with you is enough for them to determine whether your company could be a worthwhile partner.
For them, the relationship carries more value than formality — so after a period of negotiation, contracts are signed, but do not be surprised if you need to revise them multiple times.
Trust is the key to negotiation, and until they feel comfortable enough to make a decision, they will not feel the slightest discomfort in postponing it — do not make the mistake of trying to pressure them at that moment.
Still on the subject of building a strong relationship…
Be prepared to have your first meetings outside the office, in relaxed settings such as a bar or restaurant…
They will want to get to know you beyond the formalities.
And it is precisely in those moments that you are most at risk of making a misstep that could ruin your plans.
Above all else, do not forget that the key difference in how we negotiate is:
Brazilians negotiate; Chinese people bargain.
And that distinction is decisive for achieving success.
Without a doubt, understanding what underlies the Chinese mindset is the greatest differentiator in negotiations and in strengthening ties with them.
To gain that command… studying China's culture, history, and success stories is the fastest path.
Of course, a country with 5,000 years of history has more than enough stories and cases for anyone to get lost in — and never learn what they truly need.
Prejudice can destroy your company
If you are around the same age as I am, you have very likely experienced something similar…
I remember that from a very early age, my father insisted I take English classes.
Honestly, I hated it.
For a 10-year-old child, it made absolutely no sense to trade free time — playing and watching cartoons on television — for extra English lessons.
That lack of sense was nothing more than my own bias.
I was too immature to see the importance of learning the language.
I still remember my moments of rebellion, trying to figure out why I would ever need English in my life.
Today, I can only be grateful.
Had it not been for my father's persistence and firm hand, I certainly would not have had half the opportunities I have had…
I would not have graduated in New Jersey, and I would not be a Forbes columnist today.
Perhaps I am being too hard on myself…
But ignorance begins where knowledge ends…
And had I followed the bias of a 10-year-old boy who knew nothing about the market, let alone about opportunities…
How many things would I have missed out on in my life?
My father's insistence had good reason behind it:
The world's greatest superpower was our largest trading partner, and he knew that a great deal could emerge from that.
And he was right.
The US was already setting the rules of the game back then, and having the tools to engage with them would put you on the right side of it.
But today, according to the numbers, the game is shifting…
The US took 117 years to multiply its GDP by 36 times.
The current second-largest power on the planet achieved the same feat 4 times faster, in just 30 years.
A new nation has begun calling the shots and threatening American global supremacy…
Napoleon Bonaparte once said:
"China is a sleeping giant. Let her sleep, for when she wakes, she will shake the world."
And the Dragon has awakened.
After 80 years, it finally surpassed the US and assumed the position of Brazil's largest trading partner.
And just as we could not avoid the impact of the US on the Brazilian market, we will not be able to avoid the impact China will bring.
Especially at an individual level.
Does this mean you need to learn Mandarin?
No.
Fortunately, with technology, languages are no longer a barrier.
But it does mean that it is better to shed any prejudice and stop trying to avoid China.
Because doing so could cost your company its health.
Consider these numbers:
The final price of a product manufactured in China can be up to 25 percent cheaper compared to production in Brazil.
Consequently, it is possible to project a profit margin increase of 30 to 35 percent.
If your competitor reduced their production costs by 25 percent today, would you be able to keep up?
This is just one example of the importance of ties with China.
But even though you do not need Mandarin, we are talking about a people with a mindset that is completely different from ours.
And the greatest hallmark of our relationship with China is:
Unfamiliarity with Customs.
If you did not catch the wave of opportunities that the US brought a few decades ago…
This is your chance to do things differently.
Especially today…
A war is underway, and Brazilians stand to gain enormously from it.
I am talking about the chance to expand businesses, attract investors, take companies to the next level, and significantly increase profit margins.
A smile is worth money in China
Are you short on reasons to smile?
What world are you living in?
Because around here, a smile is worth money.
That is how a place with so much technology operates.
In a place teeming with robotics, IoT, big data, artificial intelligence, and everything cutting-edge in technology that you can think of…
While machines gain ground in synergy with humans, a smile is enough to pay a restaurant bill.
On the other hand, do not even try to spend your cash here…
Cards are not accepted.
To this day, the overwhelming majority of establishments only accept payment via apps.
So unless you have your money in an app, you will not be able to buy practically (to put it mildly, absolutely) anything.
Even the homeless here walk around with their QR codes around their necks asking for a "scan."
And as strange as it may seem, I am not writing this from the future.
Nor am I talking about Silicon Valley, which has MUCH fewer people living in a fully functional coexistence with machines.
In fact, nowhere in the US will you find anything remotely like this…
The speed at which technology develops, deals are made, and the economy moves is astonishing.
To give you an idea…
The US multiplied its GDP by an impressive 36 TIMES over a span of 117 years…
Here, it took only 30 years to break the same record.
Seriously, you have no idea what this place is like.
It is remarkable what 1.3 billion people with a completely different mindset from ours are capable of producing.
Nine million square kilometers of pure innovation and interaction between humans and machines.
After traveling across 5 continents, graduating in the US, and specializing in Europe…
I had to choose a place to settle. And I chose China for one very specific reason:
What you find in China, you will only find in China.
Want an example?
China has the world's most advanced facial recognition technology.
Ultimately, the challenge of overpopulation… drove the development of technologies as sophisticated as this one.
Which can be used not only for "smile" payments, but also for crime prevention.
Ensuring extremely high levels of security even in the world's most populous place.
Technology is the best ally in managing the world's largest population.
And unlike what the American government does — concentrating development in a single hub like Silicon Valley…
To continue encouraging technological development and preserving mutualism, the Chinese government grants incentives…
Both to foreign companies and to small domestic businesses.
The result is 4 massive innovation hubs, with many people carrying good ideas being funded.
Consequently…
Around 9 percent of American unicorns reach a market valuation of 1 billion dollars in less than two years from the company's founding.
In China, nearly half — approximately 46 percent — of all unicorns reach the same status in the same timeframe.
Seriously, there are MANY opportunities here.
Keep your eyes wide open when it comes to China.
Text by Ricardo Geromel
Want to learn more about how to negotiate with China? Check out this course by Startse:
