US-China Trade War Claims AUS Casino Jobs

Deanna Hammes - 13-06-2019

US china trade warOne of the biggest Australian casino operators has become a victim of collateral damage in the ongoing US-China trade war. Star Entertainment Group Ltd revealed that the effect has been so severe, it will cost hundreds of employees their jobs in a few days’ time.

According to reports, the operator announced that its predicted profits for the current financial year already have been reduced by AU$18 million. The slashed profit projection resulted in the lowest share prices since it was listed four years ago.

Why an Australian Casino Was Affected

The biggest reason for the plunge in profit projection and share prices, as well as for the impending job cuts, was a loss of confidence among high-rolling VIP players from China. This was especially palpable after the US imposed punitive tariffs of 25% on various Chinese-manufactured goods – and more such tariffs are on the way.

The effect of the trade war on China’s economy has been felt so keenly among the country’s VIP gamblers, that they spent 16.5% less than usual in the operator’s casinos in Brisbane, Sydney, and the Gold Coast this year. By the end of the first week of June, this had led to a 31% drop in turnover.

Star Entertainment CEO Matt Bekier summed up the situation vividly. He described how some of the company’s most important customers had visited its casinos for a couple of days only, whereas previously, they would have stayed and gambled for a week. Bekier added that lesser factors in the operator’s poorer turnover this year was an actual win rate that has been higher than the theoretical win rate, as well as disappointing domestic growth.

No Sign of Respite

The drastic measure of cutting jobs will lower the Australian casino operator’s overheads, but it will do nothing to resolve the actual issue. Instead, the US-China trade war looks set to drag on indefinitely.

In response to analysts’ predictions that the VIP gambler market will rally in the next financial year, Bekier said that, even if there is an increase in spending, it is not likely to be a significant one.

What Started the Trade War

The current breakdown in US-Chinese relations can be traced back to Donald Trump’s campaign for the presidency. In June 2016, he promised to bring international trade deals to an end.

In January 2018, the US president slapped a 30% tariff on foreign-manufactured solar panels; the largest producer of which is China. He also placed a 20% tariff on the first 1.2 million washing machines to be imported last year. These tariffs were followed by one of 25% on steel, and one of 10% on aluminium, in March 2018.