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U.S. companies in China brace for more trade-war pain

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U.S. companies in China brace for more trade-war pain
U.S. companies in China brace for more trade-war pain
U.S. companies in China brace for more trade-war pain
A chassis frame at a BAIC ORU assembly plant in Beijing last week. (Andy Wong/AP)
September 4 at 7:59 AM

BEIJING — Days before President Trump is expected to impose tariffs on an additional $200 billion in Chinese goods, some U.S. businesses here are reluctantly drafting plans for a new era of hindered trade between the world’s two largest economies.

The levies that Washington fired at Beijing this summer — and the Asian nation’s swipes back in equal measure — have stung bottom lines and provoked grumbling from industry groups. But Trump’s latest threat, which could take effect as early as Thursday, would amplify the commercial battle fourfold.

Analysts say U.S. firms caught in the crosshairs are taking steps that executives tend to dread: They are preparing to reshape supply chains and raise prices.

“These are not the kinds of decisions companies want to undertake,” said Jacob Parker, vice president of China operations at the U.S.-China Business Council, which represents about 200 companies, including PepsiCo, Apple and General Motors.

Since the majority of televisions sold on U.S. soil are manufactured in China, Trump’s 10 percent levies slated for TV parts could inflate bills for shoppers back home. Duties on down feathers and fabric, which also pour into the United States from the Asian nation, could lift the cost of bedding that deal hunters might seek at Walmart or Target.


Trump, who aims to force Beijing to end trade practices he considers predatory, has shown no sign of relenting as the $200 billion deadline looms.

Chinese officials have vowed to retaliate against the move, which would slap levies of up to 25 percent on consumer goods including clothing, furniture, refrigerators and toilet paper — and effectively place higher taxes on nearly half the goods China ships to the United States.

“People who still believe China will submit to intimidation, threats and groundless accusations should wake up,” Hua Chunying, a spokeswoman for the Ministry of Foreign Affairs, said at a news briefing last week.

Economists at Tsinghua University in Beijing estimated in a recent study that the heightened trade war could shear about a third of a percentage point off the country’s growth, which is projected at 6.6 percent for 2018.

Wu Baiyi, director of the Institute of American Studies at the Chinese Academy of Social Sciences in Beijing, cautioned that workers could be the first to suffer if the conflict escalates. The cost of doing business in China, he said, could swell and spur layoffs.


“The impact will be huge,” Wu said. “We are in the second phase of this trade war, and everyone has stopped having illusions.”

China’s manufacturing sector, which accounts for nearly a third of the economy, grew at a dampened pace in August, with demand falling to a 15-month low, according to a report Monday from the Caixin China General Manufacturing Purchasing Managers’ Index that blamed trade tensions and environmental protection policies. New export orders dwindled for the fifth straight month.

Climbing labor costs, however, long ago started shoving production from China to India, as well as Vietnam and other countries in Southeast Asia. The trade dispute has sped up this process, said Thibaud Andre, a senior consultant in Beijing at Daxue Consulting, which advises Chinese and foreign firms.

“It’s just an acceleration of a trend that started years ago,” he said.

Trump has imposed levies on a variety of Chinese goods this year, starting with steel and aluminum imports and then advancing to $50 billion in industrial equipment, plastics and chemicals.


Trump aims to reduce the $376 billion trade deficit with China and pressure the country to work with U.S. firms without tapping their business secrets — Beijing has denied allegations of stealing foreign technology — among other changes to its commercial practices.

The Chinese government has responded by imposing new border taxes on an equal amount of U.S. imports, including pork, soybeans and automobiles.

David Dollar, who served as the U.S. Treasury Department’s economic and financial emissary to China from 2009 to 2013, said there is no sign that tensions between the two sides will soon ease .

“It is unlikely that the U.S. would back down now,” he said, “because there are no talks underway and no obvious reason for the administration to change course.”

However, given the backlash from the business community, Dollar said, the White House could choose to drop some items from its list of tariff targets, shrinking the headline total from $200 billion.

Bonnie S. Glaser, director of the China Power Project at the Center for Strategic and International Studies, a think tank in Washington, said she expects Trump to plow ahead with the full list, despite the political and economic risks.


“President Trump appears to think that by upping the ante he can wrest major concessions from China,” she said.

Chinese leaders have pledged to add tariffs to an additional $60 billion of U.S. goods if Trump follows through on his threat Thursday. After that, Beijing will have practically run out of products to tax: China bought $130 billion in goods last year from the United States, compared with the United States’ orders of $505 billion in goods from the Asian country.

There are other ways to make life harder for U.S. companies: Some businesses here have already reported a sudden hike in regulations, such as prolonged border inspections of goods, which have resulted in loads of spoiled fruit. (Beijing has denied any formal mandates to mess with U.S. firms.)

The Chinese government also has been known to incite boycotts of foreign brands. The South Korean conglomerate Lotte Group got a taste of that last year, analysts said, after the company allowed the U.S. military to use its land for a missile defense system that China fears can be used against it.

Next up could be Apple, suggested an August editorial in the government-backed Global Times newspaper: “China is by far the most important overseas market for the US-based Apple, leaving it exposed if Chinese people make it a target of anger and nationalist sentiment.”

Luna Lin contributed to this report.



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U.S. companies in China brace for more trade-war pain
Danielle Paquette Danielle Paquette is a reporter focusing on national labor issues. Before joining The Washington Post in 2014, she covered crime for the Tampa Bay Times in St. Petersburg, Fla.
Pub Time : 2018-09-05 11:51:59 >> News list
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