As President-elect Donald Trump’s trade and foreign policy teams take a hard line against China, U.S. businesses are increasingly concerned that a tough approach could hamper their prospects in the world’s second-largest economy — and turn them into China. The target of revenge.
Trump has threatened to impose tariffs of at least 60% on China and vowed to end dependence on China. That alone can cause havoc. That will force businesses to scramble to find alternative sources of supply, force American consumers to pay higher prices in stores, and many experts believe will lead to job losses.
Most importantly, the Chinese government can respond by expanding its toolkit to target U.S. companies.
“The Trump administration’s actions may be viewed or may be interpreted as economic warfare,” Scott Kennedy, senior adviser at the Center for Strategic and International Studies, told reporters in Beijing on Thursday. “If it were interpreted that way, China would likely respond more forcefully than just with tariffs.”
Kennedy said the actions could range from economic changes to diplomatic and security issues, adding that China would likely “fight back in any way it can.”
As nationalist sentiment grows in China, a more acrimonious relationship between China and the United States also brings the risk of a public backlash. The Chinese government’s tight controls on information flow have led to consumer boycotts of international brands.
“The worst thing is that consumer brands that are not strategic, not inherently controversial, and not subject to export restrictions may be punished by local consumers because of their nationality,” said Michael Hart, president of the American Consumer Association, China Chamber of Commerce. “Since the COVID-19 pandemic, companies have been looking to diversify and strengthen supply chains, but there are still no simple and reliable alternatives to the supply chains and manufacturing that China has developed over the past few decades.”
China’s retaliation toolkit
During Trump’s first term, the Chinese government imposed tariffs on U.S. imports in retaliation for U.S. tariffs.
The U.S.-China Business Council and Oxford Economics jointly estimate that a new tit-for-tat tariff war could cause “permanent losses in revenue and force businesses to cut employment and investment plans” with as many as 801,000 net job losses by 2025. .
The report predicts that Nevada, Florida and Arizona will be among the states hardest hit by such tariffs because their economies rely on consumer demand. Manufacturing states such as Indiana, Kansas, Michigan and Ohio will also be affected, the Oxford report found. Swing states Nevada, Arizona and Michigan have all swung to Trump in the 2024 election, helping him return to the White House.
During the last trade war, China also stopped buying agricultural products from the United States, a move that targeted major U.S. exports such as soybeans and caused disproportionate harm to rural America, where Trump has strong support.
U.S. President Trump attended a bilateral meeting with Chinese President Xi Jinping on the sidelines of the G20 Leaders’ Summit in Osaka, Japan, on June 29, 2019.
Kevin Lamarque | Reuters
James McGregor, a business consultant who has been involved in China issues for three decades, said that if Beijing feels pressure this time, he believes Beijing will use its influence on U.S. agricultural purchases.
“China is already committed to getting rid of its dependence on U.S. agricultural products. If there are alternative supplies, China will probably try to get rid of U.S. farmers as much as possible,” McGregor said.
Two years ago, China began importing corn from Brazil. China has now surpassed the United States to become its largest corn supplier
Beijing could also expand its retaliatory repertoire to include targeting U.S. companies operating within China.
Since Trump’s first term, China’s business environment has tightened significantly. Although China’s leadership has publicly stated that it welcomes international businesses, the American Chamber of Commerce in China’s 2024 Doing Business Survey found that 39% of companies surveyed felt less welcome in China.
Stricter laws, stricter regulations
There is also the risk of legal and regulatory changes in China that could threaten U.S. companies.
In recent years, China has made significant changes to its export control regulations. These tighter controls limit critical metals for the U.S. clean energy and semiconductor industries.
Analysts expect China to do the same during Trump’s second term, aiming to deprive U.S. industry of critical minerals and components.
Beijing has also tightened laws such as the Anti-Foreign Sanctions Act, which has triggered investigations, fines and restrictions on business in the country.
Even before the U.S. election, Beijing had shown signs of targeting some U.S. companies. For example, PVHThe owner of Calvin Klein is under investigation over the law.
China has upgraded its counterintelligence laws, which international business groups such as the American Chamber of Commerce in China have criticized, calling the policy “vague”.
The law has led to the detention of top executives and employees and raids at international companies, and made it easier for officials to impose exit bans that bar defendants from leaving the country.
Many worry that the day-to-day regulatory work of operating in China could become more difficult in an environment of heightened retaliation.
Since Trump’s first term, Chinese leader Xi Jinping has further consolidated power.
Experts say if Xi hints that U.S. companies are falling out of favor, they may expect lower-level officials to impose stricter interpretations of regulations on licenses, safety inspections, permits and other approvals.
“We may see retaliation against American companies in China, and these companies may be gradually squeezed out of the Chinese market and replaced,” McGregor said.
About The Author
