China's retaliation could target US companies over Trump actions

Donald Trump’s trade and foreign policy team is taking a hawkish stance toward China. Due to this US companies are increasingly concerned that a strict approach towards China canstunt the prospects of the US companiesin the world’s second-largest economy. They might also turn into clear targets for China's retaliation against any Trump tariffs, according to a detailed report by CNBC.

Trump has threatened 60 per cent tariffs on China

Trump has threatened to hit China with 60 per cent tariffs and has pledged to end reliance on the country. This step alone will be disruptive. It will force companies to scramble to find other sources of supply, American consumers to pay higher prices at the store, and, according to many experts, lead to job losses. On top of that, the Chinese government could respond with expanded steps and measures to target American businesses elaborated the CNBC report further.

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China might view US steps as an Economic war

“The Trump administration’s actions may be seen or may be interpreted as economic war,” Scott Kennedy, senior advisor at the Center for Strategic and International Studies, told reporters in Beijing on Thursday. “If they are interpreted in that way, China might have a much more vigorous response, not limited to tariffs.”

Further, those actions could range from economic changes to matters of diplomacy and security, Kennedy said, adding China may “push back as hard as they can.”

More combative relations between the US and China also bring the risk of public backlash amid rising Chinese nationalism. The Chinese government has strong controls over information flow which has led to consumer boycotts of international brands. This will basically put both the economies in direct competition with each other.

Impact of US-China trade war

During Trump’s first term, the Chinese government retaliated against UStariffs by imposing tariffs on US imports. The US-China Business Council, in conjunction with Oxford Economics, estimates a new tit-for-tat tariff battle could result in a “permanent loss of revenue and pressure businesses to slash jobs and investment plans” with as many as 801,000 net job losses by 2025.

The report projected that Nevada, Florida and Arizona would be among the states hardest hit by such tariffs due to their economic reliance on consumer demand. Manufacturing states such as Indiana, Kansas, Michigan and Ohio would also be vulnerable, the Oxford report found. Swing states Nevada, Arizona and Michigan all flipped to Trump in the 2024 election, helping to deliver him back to the White House.

During the last trade battle, China also stopped buying agricultural products from the US. The move targeted key US exports like soybeans, disproportionately hurting rural parts of the U.S. where Trump has strong support. James McGregor, a business consultant on China for three decades, said he sees Beijing using its leverage on USagricultural purchases if it feels pressed this time, too.

“China is already focused on ridding itself of dependence on US farm products. If alternative supplies are available, China may well shift away from American farmers where they can,” McGregor said, added the CNBC report.

Two years ago, China started importing corn from Brazil. The country is now China’s biggest supplier of corn, surpassing the US. Beijing could also broaden its retribution methods to include targeting US companies operating on Chinese soil. Then there’s also the risk of legal and regulatory changes in China that could threaten US companies. In recent years, China made significant revisions to its export control regulations. Those tighter controls have restricted critical metals for the American clean energy and semiconductor sectors.

Market participants and global investors will closely follow these developments and the ultimate stance of the Trump administration against China. This will help them in understanding the future trajectory of the US-China relations along with helping them in making informed investment decisions.