Donald Trump’s tenure as US president has brought an air of unpredictability to many aspects of American politics – but could his touted trade war with China have a significant impact on Macau casinos?

A trade war has been long anticipated under Trump’s presidency, as the President continually vowed that he would “make trade fairer for America”, outlining his ambition to encourage consumers towards US goods by elevating taxes on foreign goods.

The former Apprentice host made it clear he was both adamant and sincere when it came to inflicting drastic changes on US trading policy. He’d barely connected his mobile to the White House wifi – on just his first day in office – when he took the landmark decision to withdraw from the Trans-Pacific Partnership Trade Pact.

Since then, although Trump’s rhetoric on trade continued, his actions have dwindled somewhat. However, any notion he was beginning to back down on the subject were quashed in June when the President again made the first moves towards a much-feared trade war between China and the US, slapping a 25 per cent tariff on $50bn worth of Chinese goods.

China hit back, outlining that it would replicate the move by the US, with both tariffs coming into force on 6 July. This inevitably caused a retaliation from Trump, who vowed to add a 10 per cent levy on an additional $200bn of Chinese imports, if the country didn’t “change its practises”.

With a potential trade war between the two economic powerhouses in its infancy, the effects on Macau’s vast casino industry have so far been minimal. Should it escalate, the effects could deepen and have a resounding impact on US casino operators in the region.  

Three of the six main players in Macau’s thriving casino sector are US listed companies, furthermore, upon the implementation of Trump’s new tariffs, shares in Wynn Macau, MGM China and Sands China all took a hit.

Steve Vickers, a former head of the Royal Hong Kong Police Force’s criminal intelligence bureau for 18 years, and now chief executive of political and corporate risk consultancy Steve Vickers and Associates, expressed his concern to the South China Morning Post via email.

“The US casinos are sitting on a geopolitical fault line. It would surely be better from Beijing’s perspective that the gaming proceeds go to more loyal and local champions, not foreign firms. And especially not to those controlled by China’s main economic rival.”

Although it remains questionable whether China would do so because of the substantial size of US casinos within the region, if the Chinese government did choose to retaliate to Trump’s latest trading tariffs by punishing US interests in Macau, it would likely do extensive damage to the sector and the companies involved.

American casino companies are heavily reliant on revenue from Macau. In its last set of results, Las Vegas Sands group reported year-on-year earnings were up around 20 per cent in the three months to December 31, 2017, thanks largely to huge gains in Sands China’s Macau operations.

As well as this, a study published by Casino News Daily emphasised just how the Macau casino sector is outperforming its Vegas counterpart. The research detailed that, in 2017, Macau generated $33bn in gross gaming revenue, whereas Vegas revenues were reported at $7.09bn, a differentiation that has been replicated to one extent or another from 2007 onwards.

One of the more obvious ways in which Beijing could hamper US casinos in Macau would be to increase the tax on foreign casinos in the zone. This could be potentially alluring to the government, as currently the tax rate is 39 per cent, with the amount the government takes on tax from the casino gross revenue accounting for approximately 79 per cent of total government revenue in the first 11 months of 2016.

Another weapon in such a war would be if the Chinese government was to lobby VIP Chinese players to invest their money more patriotically. This could be significant as within the region VIP table players make up a large proportion of Macau’s revenue, something that isn’t replicated in any other major global casino market.

As the global economy braces itself for a potential trade war between the world’s largest two economies, Macau remains a fragile source if valuable of income for both China and the US. As such, it’s unlikely either will be reckless in making moves that affect the region’s casino market.

That being said, should the trade war grow it seems implausible that Macau should emerge completely unscathed, something that would inevitably be the source of serious concern among US casinos that rely on revenue from the region. And if the Trump era has taught us anything, it is to expect the unexpected.