Trade War Winner: PRC Leather Goods Counterfeiters

Trump [hearts] fakeries: of trade war and the rising attractiveness of counterfeits.

The folks over at the South China Morning Post have a long list of established and recognized Asian companies either benefiting or losing out from the escalating US-China trade war. However, it's not just these big names who we should consider when it comes to regional winners and losers from Trump's trade machinations. The Washington Post notes that, actually, PRC counterfeiters may stand to benefit from the ongoing tiff.

How might this be so? Those trading in legitimate leather goods will invariably register with US customs authorities and be hit by Trump's forthcoming 10% tariffs. On the other hand, the fakers will continue to try to sneak in their goods Stateside, further widening their price advantage over legitimate items:

Knockoffs of famous brands - Coach, Kate Spade and others - are mostly made in China and arrive at US shores through clandestine channels built to dodge authorities. The authentic purses and their components, also made in China, are shipped through official routes and would face Trump's proposed new duties of 10 per cent effective next Monday.

This all stacks up in favour of the counterfeit labels at every step of their illicit journey: from factory floors in China to street vendors in cities worldwide.

It's not that purveyors of genuine articles don't understand what's likely to happen; it's that Trump is too obstinate to care. End result? A possible windfall for counterfeiters;

The next wave of tariffs target another US$200 billion in Chinese imports, including handbags, leather and silk. This prospect alarms both American fashion designers and global authorities, because US firms already lose billions each year to counterfeiters. Officials also link knockoff sales to organised crime groups that exploit child labour.

"A tariff on a genuine bag is a subsidy for a fake," said Susan Scafidi, a New York fashion lawyer focused on intellectual property.

The global counterfeit trade for all items, from purses to electronics to software, is worth US$461 billion, according to the latest estimate by the Organisation for Economic Cooperation and Development. That is more than the global drug trade. And more than 85 per cent of the handbag replicas originate in mainland China and Hong Kong. A fifth of counterfeit busts worldwide involve American brands.

The end result is that trading in shady enterprises is made more attractive relative to earning an honest living. But then again, isn't that Trump's life story in a nutshell?