China targets U.S. services and other areas as it decries ‘meaningless’ tariff hikes on goods
-China trade war has been characterized by a series of retaliatory measures and countermeasures, resulting in a high-stakes game of economic brinkmanship. While the Trump administration has mainly focused on imposing tariffs on Chinese goods, Beijing has adopted a more multifaceted approach, targeting key sectors of the American economy.
One of the latest moves by China involves measures aimed at the American services sector. China has long been running a significant trade surplus with the U.S. in services, including areas such as travel, legal, consulting, and financial services. Beijing has indicated its intention to curb U.S. legal consultancy firms and investigate U.S. companies operating in China for alleged monopoly benefits from intellectual property rights. These actions could potentially disrupt the lucrative services trade between the two countries.
China’s imports of U.S. services have surged in recent years, with the U.S. enjoying a substantial services trade surplus with China. In response, China has announced plans to reduce imports of U.S. films and cautioned its citizens against traveling or studying in the U.S. This move is seen as a way to exert pressure on sectors like entertainment, tourism, and education, which hold political significance in the U.S.
While the direct economic impact of these measures on U.S. industries may be limited, the reputational effects could be significant. Fewer Chinese students studying in the U.S. or a decline in Chinese tourism could have long-term consequences for these sectors. Additionally, the potential for deeper decoupling in people-to-people ties and knowledge exchange could signal a broader shift towards systemic divergence between the two countries.
Analysts believe that Beijing is likely to escalate its non-tariff measures in the coming months to increase its leverage in negotiations with the U.S. government. By targeting key sectors of the American economy, China aims to demonstrate its ability to inflict economic pain on U.S. companies and pressure the Trump administration to come to the negotiating table.
As the trade war between the world’s two largest economies continues to escalate, the impact on businesses and consumers in both countries is becoming increasingly pronounced. The use of non-tariff measures by China represents a new phase in the conflict, one that could have far-reaching implications for the global economy. As tensions between the United States and China continue to escalate, companies operating in China are finding themselves at the center of the storm. According to Gabriel Wildau, managing director at risk advisory firm Teneo, these companies are the biggest remaining target for inflicting pain on the U.S. side. Apple, Tesla, pharmaceutical, and medical device companies are just a few examples of businesses that could be targeted as Beijing implements non-tariff measures such as sanctions, regulatory harassment, and export controls.
The impact of these measures could be significant, as companies like Apple have a large presence in China, with stores showcasing their sleek modern interior design and prominent Apple logo. With tensions rising between the two economic powerhouses, the future of these companies’ operations in China remains uncertain.
While hopes for a deal between the U.S. and China may have been high at one point, they are fading fast. Chinese officials have criticized the “unilateral tariffs” imposed by President Trump as “bullying,” and have vowed to “fight to the end.” Despite this strong rhetoric, Beijing has left the door open for negotiations, emphasizing the importance of negotiations being on “an equal footing.”
In response to calls for a deal, White House press secretary Karoline Leavitt stated that President Trump is open to negotiations with China, but that Beijing must make the first move. This sentiment was echoed by a spokesperson for China’s ministry of commerce, who emphasized the importance of the U.S. stopping its “threats and blackmailing” in order for negotiations to move forward.
Economist Jianwei Xu of Natixis believes that only when a country experiences sufficient harm will they soften their stance and return to the negotiation table. As the trade war between the U.S. and China continues to escalate, the impact on companies operating in China remains uncertain. It is crucial for businesses to closely monitor the situation and be prepared for any potential changes that may arise.
