Bad News for BABA Stock?
U.S. trade officials appear ready to add Alibaba Group Holding Ltd (NYSE:BABA) to a list of “notorious markets” for counterfeit goods, potentially ruining BABA stock in the process.
The warning signs are littered in a new report from the U.S. Trade Representative.
They allege that Alibaba does not work to keep counterfeit items off its various platforms, and that when there are situations like this, its efforts to deal with fraud are insubstantial.
“Brand owners continue to report that Alibaba platforms, particularly Taobao, are used to sell large quantities of counterfeit goods,” said the USTR report. (Source: “U.S. Warns Alibaba Again About Selling Counterfeit Goods,” The Wall Street Journal, December 17, 2016.)
“Despite these new procedures, USTR is increasingly concerned by rights holders’ reports that Alibaba Group’s enforcement program is too slow, difficult to use, and lacks transparency.”
Regardless of whether or not these allegations are fair game, adding Alibaba to that infamous list would be an obvious shot across the bow from U.S. trade authorities.
Think about it.: Who is going to be the next President of the United States?
And did Donald Trump threaten a trade war with China?
Yes, he did.
So it doesn’t take a wild imagination to picture future-President Trump using USTR warnings as a stepping stone to a full-fledged campaign against Chinese companies. In fact, he promised as much during the election cycle and his actions since then are worrisome.
For instance, Trump plans to create a National Trade Council inside the White House. It would oversee industrial policy and would be run by a devout opponent of China: Peter Navarro. He is a Harvard-educated economist with absolutely no sympathy for China or Chinese companies.
No matter how you slice it, this is bad news for BABA stock.
A central pillar of Alibaba’s growth strategy was to expand beyond China’s borders. That’s why the company sought out a listing on the New York Stock Exchange—it wants to carve out a chunk of the North American market. Those expectations are priced into BABA stock.
That’s why investors should be worried that CEO Jack Ma was not invited to Trump’s meeting with tech leaders. It’s why anyone interested in BABA stock should be petrified that Trump spoke with the leader of Taiwan, something no president has done since 1979.
Not Reagan, not Clinton, not Obama.
By any and all standards, Trump looks ready for a full-blown trade war. Since BABA stock is in the no man’s land between Chinese and American interests, it could easily be caught in the crossfire.