VMware adjusts for a 'two trading-bloc world' due to US-China trade war, says CEO

Key Points
  • American companies are having to adjust accordingly to operating in two distinct Chinese and American marketplaces as the trade war escalates, says Patrick Gelsinger.
  • The VMware CEO says the company is adjusting to be in a "two trading-bloc world."
VMWare CEO Pat Gelsinger on earnings and growth in China

American companies are having to adjust to operating in two distinct Chinese and American marketplaces as the trade war escalates, VMware CEO Patrick Gelsinger told CNBC on Friday.

"We are adjusting our strategy to really be in a two trading-bloc world," Gelsinger said. "Everybody has sort of realized this dispute will go on for a while and we're working through how best to manage our businesses in light of that."

The escalating trade war between the world's two largest economies has been going on for over a year, with China announcing retaliatory measures Friday.

Beijing will impose new tariffs on $75 billion worth of U.S. goods and resume duties on American autos, starting Sept. 1 and Dec. 15, respectively. It follows President Donald Trump's threat to impose 10% tariffs on $300 billion of Chinese goods not already subject to duties, also set to be implemented on Sept. 1 and Dec. 15.

"I believe in many cases, customers are saying, 'how do I continue to do business with and within China even as there's an increasing challenge?'" Gelsinger said. "I think most companies are already figuring out how to live in that kind of world already. And clearly, we expect that our strategy needs to accommodate that."

Gelsinger appeared on CNBC's "Squawk Box" a day after VMware's second-quarter earnings and revenue beat beat Wall Street estimates. The cloud software company also announced Thursday that it's acquiring software companies Pivotal Software and Carbon Black in separate deals.

Shares of VMware were down 8.9% on Friday afternoon.

VMware "saw good results from our China business last quarter," Gelsinger said.

"Not to the level we would have hoped, but still saw growth there," the CEO added. "We're making adjustments to it even as we're long-term committed to China. We also expect there will be increasing long-term barriers between the two markets. And we have to adjust, and I believe every other business will do likewise."