Las Vegas Baccarat Revenue Impacted by US-China Trade War

The US-China trade war is beginning to spill over across an increasing number of commercial enterprises, with Las Vegas’ lucrative baccarat industry one of its potential casualties. Ever since US President Donald Trump saddled Chinese imports with billions of dollars in tariffs, the Strip has seen its baccarat revenues drop in successive months. Furthermore, Chinese visitation has dropped dramatically over the same period, meaning Las Vegas casinos may soon need to find other ways to plug the widening gap.

Reasons Behind the US-China Trade War?

US President Donald Trump has long accused China of employing unfair trade practices, and this summer he followed through on his threat to impose tariffs on the country. The levies he has imposed on Chinese products thus far amounts to $250 billion, but there is the threat of a further $267 billion in tariffs yet to come.

Meanwhile, China has retaliated by imposing tariffs on $110 billion worth of US goods, mostly because exports to the US are much less than its imports. As a result, it is also threatening qualitative measures designed to disrupt the operations of US businesses operating in China.

Commenting upon the ongoing trade dispute between the world’s two biggest economies, Derek Scissors, Asia economist at the American Enterprise Institute, iterated that “the U.S. wants… very serious changes in Chinese trade behavior and maybe domestic economic behavior.” He further added that he believes that there could be a further two more years of serious tension between the two countries before the dispute is resolved.

Las Vegas Baccarat Experiencing Fallout

In August, Nevada’s casino revenue experienced its second consecutive month of decline before noting a slight 1.3% revenue gain in September. One of the key drivers of economic growth in Sin City’s casino sector is baccarat, a card game favored by Chinese high-rollers. During the economic downturn, baccarat revenue derived from Asian tourists helped offset a drop in gambling dollars from American gamblers, and it has since continued to occupy a significant position in Las Vegas’s casino business.

US casino operators have further exploited the game’s potential by luring their Chinese high-roller guests in Macau to Las Vegas. There may be extra costs involved in charting private jets and other comps, but Vegas operations are able to make additional gains as they pay less tax in the US than in China.

Between July and September, however, baccarat saw its revenue plummet by 18 percent in Las Vegas. By contrast, other gambling games favored by American’s have held their own, including the hugely lucrative slots segment which saw its revenue grow by 2 percent over the same period. Looking further back, Strip casinos earned around $116 million from baccarat in September 2013, compared to just $69 million this September, representing a huge 41% decrease.

Tourism Numbers Down

Last week, Vanessa Sciarra, Vice President of Legal Affairs and Trade & Investment Policy at The National Foreign Trade Council (NFTC), said that the US-China trade war is unlikely to inflict any serious damage on the Silver State’s economy. She did warn, however, that trade disputes have a tendency to spill over into other areas, explaining that:

“…the reality is we think the Chinese are either telling people not to go to the United States, denying their visas to come here, or Chinese people don’t want to come here because they are afraid to come.”

According to Sciarra, there has been a significant drop in the number of university applications, business groups, and tourism dollars being spent in the United States over the past six months. As mentioned China accounts for 4.5 percent of Las Vegas’s international visitors. Commenting upon recent developments, Amanda Peters, a spokeswoman for Las Vegas Convention and Visitors Authority, stated:

“We will continue to aggressively market Las Vegas as the greatest travel destination in the world, while also working to make certain that travel to Las Vegas and the United States is easier and even more enjoyable for our customers.”