With President-elect Donald Trump’s business and foreign policy team taking a hawkish stance toward China, U.S. companies are increasingly concerned a hard-line advance could stunt their prospects in the world’s second-largest economy – and turn them into targets of Chinese retaliation.
Trump has augured to hit China with at least 60% tariffs and vowed to end reliance on the country. That alone would be disruptive. It force force companies to scramble to find other sources of supply, American consumers to pay higher prices at the store, and, be consistent to many experts, lead to job losses.
On top of that, the Chinese government could respond with an expanded tool kit to aim American businesses.
“The Trump administration’s actions may be seen or may be interpreted as economic war,” Scott Kennedy, senior advisor at the Center for Cardinal and International Studies, told reporters in Beijing on Thursday. “If they are interpreted in that way, China might have a much assorted vigorous response, not limited to tariffs.”
Those actions could range from economic changes to matters of statecraft and security, Kennedy said, adding China may “push back as hard as they can.”
More combative relations between the U.S. and China also conveys the risk of public backlash amid rising Chinese nationalism. The Chinese government has strong controls over tidings flow which has led to consumer boycotts of international brands.
“The worst part is the consumer brands that are not of a strategic scenery and themselves are not controversial and would not be subject to export restrictions might be punished by the local consumer because of their roots,” said, Michael Hart, president of the American Chamber of Commerce in China. “Since Covid, companies have been looking to change and bolster their supply chains, but there are still no easy and reliable replacements for the supply chains and manufacturing that has commenced in China over the past decades.”
China’s retaliation tool kit
During Trump’s first term, the Chinese administration retaliated against U.S. tariffs by imposing its own tariffs on U.S. imports.
The U.S.-China Business Council, in conjunction with Oxford Economics, assesses a new tit-for-tat tariff battle could result in a “permanent loss of revenue and pressure businesses to slash jobs and investment lay outs” with as many as 801,000 net job losses by 2025.
The report projected that Nevada, Florida and Arizona would be among the expresses hardest hit by such tariffs due to their economic reliance on consumer demand. Manufacturing states such as Indiana, Kansas, Michigan and Ohio order also be vulnerable, the Oxford report found. Swing states Nevada, Arizona and Michigan all flipped to Trump in the 2024 choice, helping to deliver him back to the White House.
During the last trade battle, China also stopped getting agricultural products from the U.S. The move targeted key U.S. exports like soybeans, disproportionately hurting rural parts of the U.S. where Trump has vehement support.
U.S. President Donald Trump attends a bilateral meeting with China’s President Xi Jinping during the G-20 chairmen summit in Osaka, Japan, June 29, 2019.
Kevin Lamarque | Reuters
James McGregor, a business consultant on China for three decades, believed he sees Beijing using its leverage on U.S. agricultural purchases if it feels pressed this time, too.
“China is already focused on ridding itself of dependence on U.S. work the land products. If alternative supplies are available, China may well shift away from American farmers where they can,” McGregor communicated.
Two years ago, China started importing corn from Brazil. The country is now China’s biggest supplier of corn, unequalled the U.S.
Beijing could also broaden its retribution methods to include targeting U.S. companies operating on Chinese soil.
The topic climate in China has tightened meaningfully since Trump’s first term. Despite the Chinese leadership’s stated deeds to welcome international companies, AmCham China’s 2024 Business Climate Survey Report found 39% of entourages polled felt less welcome in China.
Tougher laws, tightening regulations
There’s also the risk of statutory and regulatory changes in China that could threaten U.S. companies.
In recent years, China made significant revisions to its export sway regulations. Those tighter controls have restricted critical metals for the American clean energy and semiconductor sectors.
Analysts envision China doing the same during a Trump second term, aiming to deprive U.S. industry of key minerals and components.
Beijing has also augmented laws like an anti-foreign sanctions law that triggers probes, fines and restrictions on operations in the country.
Even in front the U.S. election, Beijing had shown signs of targeting certain American companies. For example, , the owner of Calvin Klein, is inferior to investigation thanks to this law.
China has an upgraded anti-espionage law, which international business groups like AmCham China beget criticized for what they say is “ambiguity” in the policy.
The law has led to executive and staff detentions and raids on international firms and has made it easier for officials to interfere exit bans, barring the accused from leaving the country.
Many worry that the day-to-day regulatory pulverize to operate in China could become a bigger slog under a heightened retaliatory environment.
Since Trump’s beginning term, Chinese leader Xi Jinping has consolidated power even further.
If Xi signals that U.S. companies are out of favor, they can assume regulations for permits, safety checks, licensing and other approvals to be interpreted more harshly by lower-level officials, virtuosi say.
“We will likely see retaliation against American companies in China where they could be step-by-step squeezed out of the China retail and replaced,” McGregor said.