How the US-China trade war is impacting the European pet industry

As the trade war between the two heavyweights continues, we take a look at the scoreboard. What opportunities – and threats – are out there for the European pet industry?

Battling giants – a few figures

In one corner of the trade war boxing ring is the US with 330 million people and a massive GDP of $21.3 trillion (€19.2 trillion). In the other is the People’s Republic of China: weighing in at 1.4 billion people and a GDP of $14.2 trillion (€12.8 trillion). 

These two heavyweights account for more than 20% of the global population and 1/3 of the global GDP. According to Forbes, 900 of the 2,000 world’s largest publicly traded companies are based either in the US or in China. The annual trade deficit of the US with China amounts to $400 billion (€360 billion).

Where does Europe fit in?

So how does this war of the titans impact the European pet industry? From an historical perspective, this industry has been resistant to crisis. It therefore seems unlikely that it will be adversely affected by the ongoing trade war. However, increased tariffs are likely to impact export and import activities of European pet companies. 

Domestic, European or international 

As far as pet food is concerned, Europe still consists of many domestic markets, rather than one united European market. 

This means that in Europe, besides a couple of businesses who sell products worldwide, brands focus on domestic markets. As a result, the volume of pet food exported to or imported from the US or China is limited. 

Not so in the pet accessories industry, where China is a major supplier of electrical and plastic products. Many European companies sell Chinese-sourced products in their local market or export them to others, including the US. Tariff increases means higher prices and lower demand. 

And the winner is… 

However, European companies could benefit as they become attractive to US or Chinese firms, either as strategic partners or acquisition targets for companies who wish to offset lower demand. Ultimately, entrepreneurs interested in selling their businesses could be the unexpected ‘winners’ of this clash of the titans.

Blue
Author

Jonathan Buxton

Partner, Oaklins