BEIJING -- Chinese officials have warned that they will retaliate against U.S. companies if President Donald Trump imposes tariffs on China, a U.S. business group said Tuesday, with airplanes and agricultural products among the likely targets.
The warning, issued by the American Chamber of Commerce in China, came just hours before Trump was expected to address the issue during his State of the Union address. The Trump administration is investigating whether it should impose a series of trade actions against China, in areas such as technology and intellectual property theft as well as in traditional areas of trade disputes such as steel and aluminum.
In December, Trump included economic challenges posed by China as part of his national security blueprint, vowing that he would pressure China, the world's second-largest economy, on trade.
Chinese officials have told U.S. business representatives that they are prepared to push back, said William Zarit, the chairman of the American Chamber of Commerce in China.
"I have been told by certain officials that, yes, definitely, there will be retaliation," he said at a briefing in Beijing, to announce the findings of the group's 2018 business climate survey.
Chinese officials were not specific on what form of retaliation Beijing would take, Zarit said.
"What we have urged our interlocutors is that if there is some kind of tariffs, and if the Chinese do want to retaliate, that they do so maturely and with precision, so as not to adversely affect their own economy," he said.
The relationship between Trump and President Xi Jinping of China got a promising start last year at Mar-a-Lago, Fla., but this year ties between the world's two largest economies could be rocky. Of particular concern are trade disputes and a long-standing argument over how to handle a nuclear-armed North Korea.
Last week, the Trump administration unveiled tariffs on imports of solar panels and washing machines -- industries dominated by Chinese and South Korean businesses.
If China does strike back, the two biggest likely targets would be the agriculture and aircraft industries, said Lester Ross, chairman of Chamber of Commerce in China's policy committee.
"From the Chinese government's perspective, I think it would be likely that it would target sectors that have political resonance in the United States," he said.
China imported $21.4 billion in U.S. agricultural products in 2016, according to government data, more than half of which was soybeans.
"Agriculture affects a sector where the United States enjoys a surplus and where there are competitors in other parts of the world for the commodities that China imports," Ross said. "And the producers are predominantly in states which voted for President Trump."
He noted that Boeing, the aircraft-maker, would be "another obvious example" of a company that could be in Beijing's cross hairs if the Trump administration imposes trade sanctions against China.
Boeing competes against Airbus of Europe to sell jetliners to Chinese carriers. This month, President Emmanuel Macron of France said on a visit to China that an $18 billion contract with it for 184 Airbus A320 narrow-body jets would be finalized soon, according to Reuters.
Yukui Wang, a spokesman for Boeing, declined to comment.
China could also consider initiating anti-dumping investigations of U.S. imports of other products, contending that they are sold below their fair value and subsidized by the United States, Ross said.
China remains an important market for some of the largest corporations in the United States, and their fortunes are tied in part to Chinese authorities' willingness to let them sell products or operate businesses there. That has made them fearful of complaining publicly about lack of market access and other regulatory problems. Their worries include being subject to unannounced government audits or facing anti-monopoly investigations.
But U.S. companies increasingly believe that some changes in China's business and trade practices need to be made, Zarit said.
"There's a sense that strictly just dialogue has not really brought much in terms of progress," Zarit said. "So perhaps some pressure will help get us more progress to a more balanced economic and commercial relationship."
On paper, China has more to lose from a trade war, as it exports more to the United States than it imports. Still, it is less trade-dependent than it was in the past, according to an analysis by Capital Economics, a London-based research company. Exports to the United States contribute only 2 percent to China's annual economic output, and Beijing has "far greater leeway to make life difficult for U.S. firms."
"The chances of China acquiescing to U.S. demands by leveling the playing field for firms selling to or investing in China are low," it said in a report.
In an editorial last week, the newspaper Global Times, which is controlled by the Communist Party, said China could also restrict sales of U.S. cars and the flow of Chinese students going to the United States. China could also sell its holdings of U.S. Treasury bonds, it noted.
"The easiest solution would be for U.S. leaders to realize as soon as possible that China is not a tamed sheep they can manipulate," the editorial said.
Business on 01/31/2018