With President-elect Donald Trump’s trade and foreign policy team taking a hard line against China, U.S. companies are increasingly concerned that a tougher stance could hurt their prospects in the world’s second-largest economy. It can – and will – turn them into targets for Chinese retaliation.
Trump has threatened to impose tariffs of at least 60 percent on China and vowed to end the country’s dependence on the country. That alone would be disruptive. That would force companies to scramble to find other sources of supply, American consumers would pay higher prices at the store, and, according to many experts, jobs would be lost.
On top of that, the Chinese government could respond with an expanded toolkit to target American businesses.
“The actions of the Trump administration can be seen or understood as economic warfare,” Scott Kennedy, senior adviser at the Center for Strategic and International Studies, told reporters in Beijing on Thursday. If so, China’s response could be tougher, not limited to tariffs.”
Those steps could range from economic changes to diplomacy and security issues, Kennedy said, adding that China “can push back as hard as it can.”
A more belligerent relationship between the US and China also carries the risk of a public backlash among rising Chinese nationalism. The Chinese government has strong control over the flow of information, causing consumers to boycott international brands.
“The worst are consumer brands that are not strategic in nature and are not themselves controversial and will not be subject to export restrictions,” said US president Michael Hart, punishing local consumers because of their nationality. can go.” Chamber of Commerce in China. “Since Covid, companies have been looking to diversify and strengthen their supply chains, but there is still no simple and reliable alternative to the supply chains and manufacturing that have developed in China over the past decades.”
China’s revenge toolkit
During Trump’s first term, the Chinese government retaliated against U.S. tariffs by imposing its own tariffs on U.S. imports.
The US-China Business Council, together with Oxford Economics, estimated that a new tariff war could result in “permanent revenue losses and pressure businesses to cut jobs and investment plans”. , which could result in a net loss of 801,000 jobs. By 2025.
The report predicts that Nevada, Florida and Arizona will be among the states most affected by such tariffs due to their economic dependence on consumer demand. Manufacturing states such as Indiana, Kansas, Michigan and Ohio will also be vulnerable, the Oxford report said. Swing states Nevada, Arizona and Michigan all flipped to Trump in the 2024 election, helping to propel him back to the White House.
During the last trade war, China also stopped buying U.S. agricultural products, a move that targeted key U.S. exports such as soybeans, disproportionately hurting rural America where Trump enjoys strong support. is
US President Donald Trump attends a bilateral meeting with Chinese President Xi Jinping during the G-20 summit in Osaka, Japan on June 29, 2019.
Kevin Lamarck | Reuters
James McGregor, a China business consultant for three decades, said he sees Beijing taking advantage of U.S. agricultural purchases if it feels pressure again.
“China is already focused on getting rid of its dependence on American farm products. If alternative supplies become available, China will move away from American farmers where they can,” MacGregor said. Gregor said.
Two years ago, China started importing corn from Brazil. The country is now China’s largest supplier of corn, surpassing the United States.
Beijing could also broaden its retaliatory measures to target US companies operating on Chinese soil.
The business climate in China has significantly tightened since Trump’s first term. Despite clear efforts by the Chinese leadership to welcome international companies, the AmCham China 2024 Business Climate Survey Report found that 39% of companies surveyed felt less welcome in China.
Strict laws, tightening of regulations
There is also the risk of legal and regulatory changes in China that could put US companies at risk.
In recent years, China has made significant changes to its export control regulations. These strict controls have limited metals important to the U.S. clean energy and semiconductor sectors.
Analysts believe China will do the same during Trump’s second term, aiming to deprive American industry of key minerals and components.
Beijing has also expanded laws such as the Anti-Foreign Sanctions Act, which triggers investigations, fines and sanctions on operations in the country.
Even before the US elections, Beijing had shown signs of targeting some US companies. For example, PVHThe owner of Calvin Klein is under investigation thanks to this law.
China has an upgraded anti-espionage law, which international business groups such as AmCham China have criticized for “ambiguities” in the policy.
The law made it easier for authorities to impose exit bans, detaining executives and staff and raiding international firms and preventing suspects from leaving the country.
Many fear that the daily regulatory grind of operating in China could become a major slog under an increasingly retaliatory environment.
Since Trump’s first term, Chinese leader Xi Jinping has consolidated power.
If Xi signals that U.S. companies are out of favor, experts say, they can expect regulations on permits, safety checks, licensing and other approvals to be viewed more strictly by lower-level officials.
“We will likely see retaliation against American companies in China where they could be squeezed out of the Chinese market step by step and replaced,” McGregor said.
