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McDonald's CEO worries trade war with China is slowing foot traffic there

Key Points
  • McDonald's CEO Steve Easterbrook said the U.S. trade war with China may account for slower foot traffic in the Asian nation.
  • Foot traffic in the U.S. also slumped in the second quarter.
A pedestrian walks past an advertisement for McDonald's in Shenzhen, China, on August 4, 2014.

A drop in foot traffic at McDonald's restaurants in China in recent months has CEO Steve Easterbrook worried that the trade war between the Trump administration and Asia has turned off customers there.

"A somewhat more noticeable trend over the last say, three to six months, has been in China, where we are still getting like for like sales growth but the guest count growth has gone negative in China through the quarter," Easterbrook said on a conference call discussing the company's second-quarter earnings Thursday.

President Donald Trump appears to be making important progress in trade talks with U.S. allies, but on the Chinese front, matters seem to be getting worse.

The U.S. slapped tariffs on $50 billion worth of Chinese products, and China retaliated. Tariffs on the first $34 billion went into effect earlier this month by both countries, with the balance yet to be implemented. But there are bigger threats in the offering, with Trump proposing $200 billion more in an effort to get China to ease its position on U.S. intellectual property and tariffs.

"There has been a big impact within that market on the uncertainty of the trade has clearly hit the markets, which in turn has hit consumer confidence," Easterbrook said. "So, we are keeping a close eye on that and adjusting our plans so that we can be competitive."

Foot traffic in the U.S. also slumped in the second quarter, falling 0.3 percent. In the last five quarters, this metric had been positive.

Even with this decline, McDonald's same-store sales, a key metric for restaurant companies, were up 4 percent globally, higher than the 3.5 percent expected by StreetAccount. The Golden Arches' sales this year have been fueled by higher check averages, more expensive menu items and diners adding Dollar Menu items to their orders.