US companies could find themselves in the crosshairs if China retaliates against Trump

President-elect Donald Trump’s trade and foreign policy team is taking an aggressive stance toward China.
U.S. companies are increasingly concerned that a crackdown could hamper their prospects in the world’s second-largest economy — and make them targets of Chinese retaliation.
China’s retaliatory tactics can range from economic changes to issues of diplomacy and security.

As newly-elected President Donald Trump’s trade and foreign policy team takes an aggressive stance on China, U.S. companies are increasingly concerned that a crackdown could hamper their prospects in the world’s second-largest economy — and make them targets of Chinese retaliation.

Trump has threatened to hit China with tariffs of at least 60% and promised to end the country’s dependence. That alone would be disruptive. It would force companies to look for other sources of supply, force American consumers to pay higher prices at stores and, according to many experts, lead to job losses.

Furthermore, the Chinese government could respond with an expanded toolkit to target U.S. companies.

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

Those actions could range from economic changes to issues of diplomacy and security, Kennedy said, adding that China is “pushing back as hard as we can.”

More combative US-China relations also carry the risk of public backlash amid rising Chinese nationalism. The Chinese government has strong control over the flow of information, which has led to consumer boycotts of international brands.

“Worst of all, consumer brands that are not strategic, not themselves controversial and would not be subject to export controls could be punished by local consumers because of their nationality,” said Michael Hart, president of the U.S. Chamber of Commerce in China. “Since Covid, companies have been trying to diversify and strengthen their supply chains, but there are still no easy and reliable replacements for the supply chains and manufacturing that have developed in China over the past decades.”

The Chinese retaliation toolkit

During Trump’s first term, the Chinese government retaliated against US tariffs by imposing its own tariffs on US imports.

The US-China Business Council, working with Oxford Economics, estimates that another tit-for-tat tariff battle could result in a “permanent loss of revenue and pressure on companies to cut jobs and investment plans,” with as many as 801,000 net job losses. by 2025.

The report predicted that Nevada, Florida and Arizona would be among the states hardest hit by such tariffs because of their economic dependence on consumer demand. Manufacturing states such as Indiana, Kansas, Michigan and Ohio would also be vulnerable, the Oxford report found. The Swing states of Nevada, Arizona and Michigan all voted for Trump in the 2024 election and helped return him to the White House.

During the latest trade battle, China also stopped buying agricultural products from the US. This measure targeted key US exports such as soybeans, disproportionately affecting rural parts of the US where Trump has strong support.

James McGregor, a business adviser on China for 30 years, said he sees Beijing using its influence on U.S. agricultural purchases if the country feels under pressure again this time.

“China is already focused on weaning itself from dependence on American agricultural products. If alternative supplies are available, China could pivot away from American farmers where possible,” McGregor said.

Two years ago, China started importing corn from Brazil. The country is now China’s largest corn supplier, surpassing the US

Beijing could also expand its retaliatory methods by also targeting U.S. companies operating on Chinese soil.

The business environment in China has deteriorated significantly since Trump’s first term. Despite the Chinese leadership’s efforts to welcome international companies, AmCham China’s 2024 Business Climate Survey Report found that 39% of companies surveyed felt less welcome in China.

Stricter laws, stricter rules

There is also the risk of regulatory changes in China that could threaten U.S. companies.

In recent years, China has made significant revisions to its export control rules. These stricter controls have limited critical metals for the U.S. clean energy and semiconductor sectors.

Analysts expect China to do the same during a second Trump term, aiming to deprive US industry of key minerals and components.

Beijing has also improved laws such as an anti-foreign sanctions law that triggers probes, fines and restrictions on operations in the country.

Even before the US election, Beijing had shown signs of targeting certain US companies. For example, PVHthe owner of Calvin Klein, is under investigation thanks to this law.

China has an improved anti-espionage law, which international business groups such as AmCham China have criticized for what they say is “ambiguity” in the policy.

The law has led to arrests of executives and staff and raids on international companies and made it easier for officials to impose exit bans to prevent suspects from leaving the country.

Many worry that the daily regulatory grind of operating in China could become even more daunting under a heightened retaliatory environment.

Since Trump’s first term, Chinese leader Xi Jinping has consolidated power even further.

If Xi signals that U.S. companies are out of favor, they can expect regulations governing licensing, security checks, permits and other approvals to be interpreted more stringently by lower-level officials, experts say.

“We will likely see retaliation against US companies in China, where they could be gradually pushed out of the Chinese market and replaced,” McGregor said.