Trump’s Trade War A Threat to Macau Casinos

The election of Trump as the president of the most powerful country in the world surprised many. And for good reason too. He has shown himself to be a man constantly leaning towards the extreme on many issues, the latest being a potential trade war with China. A trade war has been a long time coming under Trump’s leadership, what with him having hinted at the fact that trade wasn’t as fair as what it could potentially be in the country, and that he intended to right that particular wrong.

Now, it seems that the situation is finally headed towards becoming a reality, and one that may very well have dire consequences for the casino industry in Macau.

Macau Casinos Fear The Worst

It was in June of this year that the weight of the situation started to show, when Trump waged a full on tax war on foreign goods, in which China is a major role-player, by imposing a 25% tax burden on Chinese goods valued at more than $50 billion.

China has, as what was to be expected, retaliated, by promising to give Trump some of his own medicine by imposing exceptionally heavy taxes on all US interests operating in the country. This is exactly where the real threat lies for the casino industry, as American casino groups are heavily reliant on income from the region of Macau.

In fact, three of the main role-players in Macau’s gaming industry are US-listed entities. These are Wynn Macau, MGM China and Sands China. The companies have already reported on having taken a hit on their share prices as a result of Trump’s hostility towards China.

Its A Waiting Game

It remains uncertain as to whether China will really wage a full-on war on all US-owned interests operating in the country, but if this does become a reality, a move like this will cause extensive damage to the businesses involved.

The extent to which American casino groups are reliant on Chinese income becomes clear when one considers that the Las Vegas Sands group reported that its year on year earnings had increased by an impressive 20% thanks to growth and gains in Sand’s Macau operations and endeavours.

What’s more, it would not take much from Beijing’s side to cripple American casino interests in Macau. It would be a simple matter of increasing taxes even further, with the current tax rate already being as high as 39%. It would be very difficult to absorb an even higher rate and still show a profit.

The waiting game has begun.

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