“The first thing to observe here is that China is not a country of laws, it's an authoritarian dictatorship," said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, who warned that American businesses could take the punishment for Trump’s antagonism. "So from that opening point, China is potentially able to play much, much dirtier than the United States."
“He will essentially force the Chinese government to retaliate in other ways — and those other ways can be much more costly to American firms,” he said. “That belief is premised on a fundamentally erroneous assumption about how the modern economy works … and a lack of concern with how engaged American businesses are involved already in China.”
American manufacturers like automakers have made considerable investments into manufacturing facilities in China, and the financial and professional services sectors have a large and profitable presence there. These and other multinationals operating in China are vulnerable to a wide array of actions the government could take against them.
For example, Chinese officials could slow the customs process for U.S. products entering the country, launch investigations into or spring inspections onto factories, hotels or other businesses — all activities for which a veneer of plausible deniability would make proving a punitive motive difficult. The Chinese government could restrict access to its market by stopping American business investment or, if the situation worsened, mandate that they divest entirely, said Mark Zandi, chief economist at Moody’s Analytics.
For manufacturers in particular, this prospect could be a big hit to the bottom line. “That would be very disruptive, it would be more costly and it would be a mess,” Zandi said.
“The biggest fear is the inability for companies that make profits to repatriate their dividends as easily as they want to."
Financial companies, along with legal, consulting, and other professional service providers could also find themselves facing more hurdles, Sabran said. “They could start to show their teeth a little bit and make it more difficult to do business,” he said. “They could basically put additional regulatory constraints on these businesses,” he said, such as requiring China-based executives to be fluent Chinese speakers, requiring data centers to be located in China or — perhaps most onerous — placing capital controls on repatriating profits.
“The biggest fear is the inability for companies that make profits to repatriate their dividends as easily as they want to,” Subran said.
China’s control over a state-run media could also be weaponized, turning China’s millennial middle class against American consumer brands. “Economic patriotism is very high,” Subran said. A campaign against highly visible products like GM cars, Starbucks coffee, Apple iPhones or even Boeing jets could damage these companies’ profitability in China.
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