How could US-China trade war affect Las Vegas casinos and US operators in Macau?

Wynn Macau, MGM China and Sands China account for 60% of the US$37.6 billion gaming revenue generated in Macau last year, compared to US$11.9 billion collected on the Las Vegas Strip.

Last July, US President Donald Trump put into effect his threats about imposing tariffs on Chinese imports in an attempt to narrow the trade gap between the two countries and as a response to Chinese firms allegedly stealing US companies’ intellectual property.

What is the scale up to date?

So far, the US has introduced punitive duties on US$550 billion worth of Chinese imported products. China has responded by increasing levies to US$185 billion worth of US imports.

In a statement made back in June 2018, Wei Jianguo, a former Vice Minister of Commerce, said that “aircraft, chips and energy imported from the US could be subject to [punitive tariffs]” and that “China is also likely to take action against the US service trade, including transport, tourism and education.” Jianguo, who now serves as Vice President of China International Economic Exchange Center, added that if the crisis deepens, China might leave US firms out of the country’s financial markets.

Up to date, China has hit back the US with a total of US$185 billion in tariffs and was recently allowed by the World Trade Organization (WTO) to sanction US imports with additional US$3.6 billion as a result of the US failing to comply with anti-dumping rules on Chinese products. The decision came on Friday, 1 November, and was criticized by the Asian rival as “overstating the amount of the impact on China” and that the WTO’s decision had “no foundation in economic analysis.”

In the latest round of talks on 1 of November, this time over the phone, between China’s Vice Premier Liu He, US Trade Representative Wright Heze, and US Treasury Secretary Steven Mnuchin, it was made clear by the by the Chinese Ministry of Commerce that some “serious and constructive discussions” took place, although US President Donald Trump rejected all speculations about an end of the trade war.

How could US-China trade war impact Las Vegas casinos and US operators in Macau?

Although Las Vegas is not the most preferred destination among Chinese tourists, casino operators would definitely not like to lose these visitors due to their affiliation to the baccarat game, which generates about 18 percent of the earnings on the South Las Vegas Boulevard.

In general terms, the impact of China’s restrictions on tourism in the US would be moderate, since the biggest flow of visitors is directed towards California, Illinois, Massachusetts, and New York, which are predominantly democratic states. That said, it is questionable if pro-Trump states will suffer from such a political movement by China.

On the other hand, the key menace is for Macau, which hosts three large US gaming operators – Wynn Resorts, Las Vegas Sands, and MGM Resorts International. The Hong-Kong listed subsidiaries of the three firms are set to renew or end their concession permissions in 2020 and 2022, which will not go unnoticed by China in the context of the trade dispute.

Sheldon Adelson expresses concerns about US-China conflict

Sheldon Adelson, chairman of casino operator Las Vegas Sands called President Trump to alert him on the possible implications of a worsened trade situation both for the US economy and the President’s re-election chances.

The billionaire casino magnate is chairman and chief executive of Las Vegas Sands Corp., which has been running its business in Macau since 2002. In 2018, 63% of the casino operator’s revenue or US$9 billion came from the Chinese territory of Macau. The Macau government is about to decide whether the casino will continue operating in the Chinese administrative region in 2022.