It is like something straight out of a Marvel movie, two of the world’s biggest superpowers – China and the US – clashing. As both begin to set tariffs, we find ourselves asking could US-China relations affect the future of, the gambling industry and therefore online slots?
It began with Trump kindling a special kind of bromance with Kim Jong-un, the leader of North Korea. Trump became the first active US president to set foot in North Korea. But, as a man that was in a WWE ring before he was in a political one, it would seem that Trump has always had a keen eye vested on showmanship.
The trade war
It was a little surprise then, that Trump did not make a quick stop in Beijing as he was visiting the eastern end of Asia, and the trade war that he has sparked has clearly lost him any few friends that he may have had in China. It would be right to think that his time would have likely been better spent kindling those relationship fires rather than posing for a number of handshakes with Kim Jong-un.
The ties that America has with China are valuable for many industries, millions of jobs and it also equates to trillions of dollars in revenue for the US. But, is there any actual evidence that we have seen to show that the trade war could have an effect on the gambling industry?
Indeed, last June, the ministry of foreign affairs in China announced that there was a safety warning for its citizens. But, it was towards Chinese nationals currently residing in the US, any companies operating there and also included tourists that may have been planning any travel.
It said: “Recently, US law enforcement agencies have on multiple occasions used methods such as entry and exit checks, and on-site interviews to harass Chinese citizens in the US. And that “The Foreign Ministry and the Chinese Embassy and Consulate in the US warn Chinese citizens and Chinese-invested institutions to raise their safety awareness, strengthen preventative measures and respond properly.”
The end of the warning by the ministry of foreign affairs advised people to get in touch with the consulate in the US if there were any emergencies. Though it did not particularly outline that it was against the US travels the message was clear – if you do not need to visit the US, do not visit the US. Vegas, for one thing, have noticed the decline in tourism through the slipping revenue from the tables that are usually popular with Chinese gamblers, like baccarat.
Evidence that could show the extent of the fractured relationship
The revenue that this casino game generates dropped 55 percent year on year for May, to $54.6 million. That is a big drop when you look at it in the context of the rest of the results for the month. Blackjack was the game that made the most revenue in Nevada’s casinos, with a drop of 12 percent $90 million. Other casino games by themselves generated revenue lower than $40 million.
Having said that, baccarat results are lower than they normally are in Macau too. So the popularity of the game is generally slowing, so the decrease in revenue in Vegas is not exactly proof that the trade and tariff war is effecting things. Nevertheless, Trump’s non-reaction to the issue could give us an insight as to why more than one of his casino ventures did not do well and failed. But, we can not just focus on the US side of things.
Macau is indeed the world’s largest gaming hub, and it has three casinos in the US which operate on the island. Sands China, Wynn Macau and MGM China will all be paying close attention to the development as reports suggest their licenses could also be on the table in the negotiations of the tariff. Macau officials are reported to be exploring ways in which they can diversify economic income, aiming to expand on entertainment thus decrease their dependency on casino revenue.
Indeed, the revenue generated from gambling in Macau is roughly six times bigger than what is made at the Las Vegas strip, with a total of $37.68 billion in Macau in the 2018 casino win and $6.59 billion on the strip. As mentioned, Macau has started to make tracks in changing their dependency on gambling but currently, it stands that about 60 percent of Macau’s gambling market comes from three US operators.
This means that when it comes to talking numbers, China will not want to stop the cash flow, because that is quite a significant one at that. As the trade war goes on, casinos in Macau will still run and even ironically may be the funders of Trump’s re-election campaign. This might save their licenses but there is no guarantee that revenue will still be as high as it has been.
All in all, stricter regulations and a bit of political friendliness, or not, will affect the future of the gambling industry. But, that is as it always has been really. Hopefully, there will be very little effects from it all, but all in all, as long as players can still gamble to their heart’s content, it will not be too much of a bad thing. After all, things are always ever-changing especially when it comes to business and this would be no different in that context.
Having said that, on a worse note, in December after talks in Buenos Aires, Trump said that he agreed to delay tariffs while a deal was being worked out. But, that did not happen – surprise surprise. The efforts from the US to restrict Chinese telecom giant Huawei will play a role in negotiations, as indeed it should the gambling market. If a mutual conclusion is not soon made, both could lose revenue and licenses might get pulled in the end.