8 reasons why picking a fight with China is a bad idea for both countries
Donald Trump the campaigner talked tough on China: He threatened to slap tariffs of 45% on Chinese exports, and promised to label Beijing a “currency manipulator.”
“We can’t continue to allow China to rape our country, and that’s what they’re doing,” he told supporters in May.
Threats to global trade will feature heavily in discussions among world leaders gathering for the APEC summit in Peru this week.
It’s too early to say whether President-elect Trump will follow through on his campaign promises. But there’s little doubt that doing so in full would spark a trade war.
Here are eight reasons why picking a fight with China is a bad idea — for both countries:
1) China will respond
“We have the power over China, economic power, and people don’t understand it,” Trump said during the campaign.
It’s true that the U.S. wields significant power over Beijing. Huge amounts of trade flows in both directions across the Pacific, but China sells far more to the U.S. than it buys from American companies. Beijing has more to lose.
But don’t for a second think that Chinese officials would not respond to aggressive action by a Trump administration with punitive measure of their own.
“If the U.S. imposes high tariffs on Chinese imports, then the smart move for China is to retaliate. China is too big to be bullied in this way,” David Dollar, the U.S. Treasury Department’s former financial emissary to Beijing, wrote recently on China File.
2) Big brands are vulnerable
Several of America’s corporate crown jewels would be vulnerable to retaliation by Beijing.
Starbucks (SBUX), Boeing (BA) and Apple (AAPL, Tech30), to name a few, have placed huge bets on China. All three companies say the country of 1.3 billion will soon be their single largest market, if it’s not already.
But that momentum could all be easily erased. Here’s what Global Times, a newspaper backed by the Communist Party, had to say about how Beijing would respond to tariffs of 45%:
“A batch of Boeing orders will be replaced by Airbus,” the paper said Monday. “U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.”
