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China Could Target U.S. Firms if Trump Levies Tariffs, Group Warns

Chinese officials have warned that they will reciprocate against American companies if President Trump imposes tariffs on China, an American business group said on Tuesday, with airplanes and agricultural items among the likely targets.

The warning, issued by the American Chamber of Commerce in China, came just hours before Mr. Trump was expected to address the problem 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 like technology and creative property theft as well as in traditional areas of trade conflicts like steel and aluminum.

In December, Mr. Trump included economic challenges posed by China as component of his national security blueprint, vowing that he would pressure China, the world’s second-biggest economy, on trade.

Chinese officials have told American 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 reprisal,” he said at a briefing in Beijing, to announce the findings of the group’s 2018 business climate survey.

Chinese officials were not particular on what form of retaliation Beijing would take, Mr. 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 change their own economy,” he said.

The relationship between President Trump and President Xi Jinping of China got a promising begin last year at Mar-a-Lago, but this year ties between the world’s two biggest economies could be rocky. Of particular burden are trade disputes and a longstanding argument over how to handle a nuclear-armed North Korea.

Last week, the Trump administration disclosed tariffs on imports of solar panels and washing machines — industries dominated by Chinese and South Korean businesses.

If China does strike back, the two largest likely targets would be the agriculture and aircraft industries, said Lester Ross, chairman of AmCham 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 American 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 components of the world for the commodities that China imports,” Mr. Ross said. “And the producers are mostly in states which voted for President Trump.”

He noted that Boeing, the aircraft maker, would be “another accessible 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, an agent for Boeing, declined to comment.

China could also consider starting antidumping investigations of American imports of other products, contending that they are sold below their fair value and subsidized by the United States, Mr. Ross said.

China remains an important market for some of the biggest corporations in the United States, and their fortunes are tied in component to the 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 issues. Their worries include being subject to undisclosed government audits or facing antimonopoly investigations.

In AmCham’s business climate survey, three-quarters of respondents said they felt less welcome in China, a minor drop from levels in the previous two years.

But American companies progressively trust that some changes in China’s business and trade practices need to be made, Mr. Zarit said.

“There’s a sense that strictly just dialogue has not really brought much in terms of progress,” Mr. Zarit said. “So perhaps some pressure will assist 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 % 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. demand 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 American cars and the flow of Chinese students going to the United States. China could also sell its holdings of United States Treasury bonds, it noted.

“The simplest solution would be for U.S. leaders to realize as soon as probable that China is not a tamed sheep they can manipulate,” the editorial said.

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