Business Capital Spikes Amidst Trump’s Trade War

/, Future of Direct-Lending, Small Business/Business Capital Spikes Amidst Trump’s Trade War

Donald Trump’s escalating trade war with China could touch every sector of the US economy. But, there’s a silken lining for American firms looking to grow as more business capital is available than ever. 

The ultimate cliche in tech is Facebook founder Mark Zucherberg‘s infamous refrain: move fast and break things. In silicon valley terms, he means innovate and aggressively acquire business capital. But mostly – do whatever it takes to out-scale your competitors.

Like everything else coming out of Menlo Park, this principle has gone global.

Enter, Trump’s trade war.

With escalating economic tensions, China has now moved to cut its holding of US debt to the lowest amount in two years.

The Chinese offloaded $20.5 billion in March 2019, bringing their overall investment in US markets to $1.12 trillion. This new sell-off means a 5% drop since 2012.

The full ramifications are somewhat unclear, according to CNBC, but experts fear China intends to use its status as the number one holder of US debt as leverage in trade talks.

More aggressive cash-outs could also undo good faith in the ongoing negotiations and incentivize more tariffs.

Whatever the outcome, economists tend to agree: trade good, tariffs bad. Trade wars have no winners they say. Everyone hurts.

What does this mean for small businesses seeking capital?

The Chinese also have their own well-trodden business cliche: their word for crisis, also means opportunity.

While much of the over one trillion in Chinese cash sits in bond markets, private companies in Beijing (such as those exist) are also selling off billions in a wide variety of other assets.

This means real estate is up for grabs, hotels, luxury goods, even entire businesses, like the media firm Legendary Entertainment.

The silk lining emerges

When global politics rather than sober economics motivates a big sell, there’s a clear opportunity for American entrepreneurs of all sizes to jump in and claim those margins.

For borrowers who see this upside, China’s market maneuvering has coincided with a record $10 billion in small business capital flowing to American entrepreneurs each month, according to Forbes.

Big ticket items like hotels may sound elusive. But large asset liquidation also means smaller assets at the yard sale: upgrades to office space, human resources, shipping infrastructure, widgets, trucks, office equipment, and reportedly, a series of yachts.

Experts advise there will be some genuine steals hitting the US market – some may even float.

The bottom line for American small businesses

Strategic divestments in US markets by adversarial foreign governments are bad news. That’s not controversial. China is flexing because Trump is doing the same. It’s a costly stare down and both sides would be better off with a deal.

So yes, this is a crisis, but as the Chinese would put it, it’s also an opportunity. Trade wars might not have winners, but there will be spoils.

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