Alibaba Group Holding Ltd (NYSE:BABA) is expected to face problems in the U.S. after Donald Trump’s victory as U.S. president-elect. According to a report from Bloomberg, the Chinese e-commerce behemoth has business tied to trade in the U.S. and Trump’s trade policies are likely to pose the biggest threat to Chinese internet companies especially Alibaba. Trump promised during his campaign to upend global trade. He proposed tariffs on Chinese goods of as much as 45%, saying that China is “killing us” on trade policy. Trump’s policies, if implemented, could lead to “devastating” results – from global trade wars to higher costs of living— and “spell the end of globalization,” Bloomberg quoted Darrell West, a vice president at the Brookings Institution, as saying. “He was very critical of Chinese trade agreements and has threatened to rip them up,” West said. “If he did that, the consequences for Chinese companies would be enormous.”
Worries For Alibaba
Alibaba has a significant part of its business tied to trade in the U.S. On the other hand, other Chinese tech companies including Baidu and Tencent focus on the local market in China.
If the Trump administration imposes higher tariffs on Chinese goods, this would depress demand for Alibaba’s Ali Express website site, where retailers from China sell to U.S. consumers. Moreover, the company’s Tmall marketplace could face problems. Using the Tmall platform, U.S. and international brands sell to Chinese consumers.
“Given the direct and indirect risks, the election probably has the greatest impact on Alibaba more than any Chinese internet business,” Wedbush Securities analyst Gil Luria was quoted as saying by Bloomberg. “If there are disruptions in trade, it would impact the willingness and likelihood of U.S. brands and retailers to take an active part on Tmall.”
Alibaba has been focusing on developing markets such as India to gain share. The company’s management has said that its primary short-term focus isn’t consumers in the U.S.
Alibaba and Trump
Alibaba Group Holding Ltd (NYSE:BABA) has been spending money to improve its service and expand globally. In August, the e-commerce company announced a new program to allow global technology companies to more easily break into China. The program, Global Marketplace and AliLaunch, is designed to facilitate international technology partners looking to enter China market.
Alibaba expects a positive business relationship between the U.S. and China. “A positive relationship between the U.S. and China is important for the world,” Alibaba said in a statement, Bloomberg reported. “We believe Alibaba is doing our part by enabling U.S. businesses — large and small –- to access the China market, creating American jobs and economic opportunity.”
The Chinese e-commerce giant faces a slowing domestic economy, making investors skeptical of the e-commerce growth prospects. The company’s stock fell over 3% on Wednesday to $96.67. The Chinese economy could face more problems if Trump imposed trade sanctions. Talking to CNNMoney on Wednesday, Chairman Jack Ma said that “it’s going to be a disaster,” if China and the U.S. don’t work together. The Chinese billionaire, who founded Alibaba, is hoping that Trump won’t carry through with the threats he made during the campaign.
In other news, Alibaba is gearing up to break its own single-day sales record on November 11, on which there is an official online shopping holiday in China. Last year, the company set a single-day sales record of $14.3 billion during the 24-hour period. This year, it is expected to make $20 billion online sales this year.