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Death in writing: Tariffs are not the only commercial weapon of China

Xi Jinping

Chinese President Xi Jinping may well be able to respond to the US decision to raise existing tariffs and impose new penalties on all remaining Chinese imports. | Jason Lee / AFP / Getty Images


Here's how China could hurt US companies without resorting to tariffs.


Customs tariffs can provoke a shock of authenticity and make the stock markets pale, but the Chinese have an even greater arsenal of economic weapons to harm American companies while the commercial wars are over. 39; intensifying.

Beijing may adopt a regulatory approach, making it virtually impossible for US companies to operate in one of the most valuable consumer markets in the world. Actions include tighter customs procedures, new paperwork requirements and increased control of business licenses. The government could also control visas, making it more difficult for US business travelers to enter the country.

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Beijing could also hurt the United States by appealing to Chinese patriotism by pushing its population to boycott American products and major brands like Apple.

These ideas are not only speculative. Chinese state media and social media reveal a population ready to fight alongside its leaders in the economic war against President Donald Trump and the United States.

"Any superficial reading of social media and public comment in China today clearly shows that pressure from civil society in China is growing rapidly," said Craig Allen, president of the American Council of Chinese Affairs.

Allen, whose group represents major US companies operating in China, said the Chinese government had tried to reassure US investors that their interests should be protected and that there were no obvious cases of misunderstanding. reprisals.

"Let's hope that stays that way," he said. "We should all be extremely cautious about creating an anti-American sentiment in the world's second largest market."

But if the trade fight proliferates, China could quickly deploy many of these non-tariff shares in order to exert a leverage effect. China has far fewer US imports to collect with tariffs than the amount of goods that China exports to the United States.

The harsher rhetoric of Chinese officials in recent days has suggested that Beijing may weigh its options as to how to react against the US decision to raise existing tariffs and impose new penalties on all Chinese imports. remaining.

Chinese President Xi Jinping warned in a speech on Wednesday that one civilization obliging another would be "stupid" and "disastrous".

A spokesman for the Chinese Foreign Ministry said China would "fight to the end".

"This has always been their secret weapon, what are called non-commercial barriers," said Michael Pillsbury, Trump's outside adviser on China-related issues. "Noncommercial barriers are where you can actually inflict damage."

The central government of China may have an interest in trying to keep any non-tariff response firmly under its control for the moment. Boycotts and similar mass movements against US companies could not only hurt Chinese business interests, but also quickly turn into social unrest, said Deborah Elms, executive director of the Asian Trade Center, based in Singapore.

"It would be playing with fire," she said.

Instead, the Chinese government could put in place "qualitative" actions that can remain firmly under its control. This could include tightening customs inspections, delaying regulatory approvals, invalidating patents and other actions taken from a reading book on which Beijing has always been relying for years. years.

China could also try to interfere with the supply chains of US companies. For example, he could inspect the production facilities of the Apple iPhone provider, Foxconn, and detect violations justifying their closure for a period of three months.

"Given Starbucks' pace of expansion in China, I guess the Chinese government will discover something that is not going at all," Elms said.

Beijing could also try to play down the impact of US rights by letting the value of its currency slip, although this may lead to bigger problems that it might want to avoid.

"These are not surgical tools," said Elms. "If I want to inspect the papers of a company, I can pretty much control that. When you start playing with the currency, it affects the whole economy. "

For US companies, the calculation has changed: Many companies now consider China's growing middle class and 1.4 billion consumers as its main market, where they now build and sell products.

With a middle class of 300 million and growing companies such as Boeing and General Motors, their future is more closely tied to that of China, where demand for aircraft and automobiles is expected to outstrip United States in the coming years.

It is unclear whether the pain of US companies in China will affect a president whose ultimate goal might be to decouple the US and Chinese economies.

"I do not think so [Trump] We want to hear directly from all of Dennis Muilenburg's members of the world, "said a former senior US official stationed in China, referring to Boeing's CEO. "If enough of them call, it could get his attention."

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