US President Donald Trump’s latest move to ratchet up tariffs on Chinese goods raises the specter that China could strike back by tripping up US companies doing business in the Asian nation — and tech is especially vulnerable.
On Tuesday, the US said it would impose a 10 percent tariff on US$200 billion of Chinese-made products, from food to electronics, by Aug. 30. That is in addition to an already-announced US$50 billion in tariffs that could raise prices on almost half of everything the US buys from China.
Chinese President Xi Jinping (習近平) has vowed to strike back.
Chinese imports from the US are not large enough to match Trump’s tariffs dollar for dollar, but the country has other levers it could use, such as imposing new taxes and added regulations on US companies, slowing deal approvals, or encouraging citizens to boycott US products. San Diego-based mobile-chip giant Qualcomm Inc is still waiting for final clearance from China for its more than US$40 billion acquisition of NXP Semiconductors NV.
Combining US corporate revenue in China with exports to the country gives the US a trade surplus of US$20 billion, according to Deutsche Bank AG.
US-based companies that derive the highest proportion of sales in China are dominated by chipmakers and other electronics manufacturers, according to data compiled by Bloomberg.
Monolithic Power Systems Inc, a San Jose, California-based component maker, tops the list, with about 60 percent of its revenue from China.
China has used non-tariff tactics in the past. South Korean and Japanese companies have been targeted during times of political tension with increased regulation, harsh new consumer safety rules and mass boycotts inspired by China’s state-run media. Apple Inc only recently staged a comeback in China, one of the company’s most important markets. Tesla Inc just announced plans to build a Chinese assembly plant, but still needs to secure approvals and permits.
HOSTAGES
China is considering delaying merger approvals, the Wall Street Journal reported on Tuesday, citing unnamed Chinese officials.
NXP fell as much as 4.7 percent, the most since June 25. Qualcomm fell 1.6 percent.
That chip deal is one of the most prominent hostages of the brewing trade war between the US and China. Qualcomm promised investors that the transaction would be closed by the end of last year. NXP has given Qualcomm until July 25 to close the deal or their agreement will expire.
Qualcomm already won clearance through the investigation phase of China’s approval process, people familiar with the matter told Bloomberg earlier this year.
The final announcement, though, might be held up amid the high-level standoff over broader trade issues and the fate of Chinese telecom equipment company ZTE Corp.
The complexity of politically infused, cross-border acquisition approvals is relatively minor compared with the global electronics supply chain, which binds China and the US, and creates domestic tensions for both countries. An Intel Corp processor made in Oregon or Arizona will often head to Chengdu where it is packaged for final installation into a computer. That computer can then be assembled for a US company such as HP Inc by a Chinese subcontractor and shipped to the US for sale. It is unclear which parts of this process would be affected by US-China tariffs.
China could make it more difficult to obtain operating licenses or building permits, Tigress Financial Partners chief investment officer Ivan Feinseth said.
‘ANNOYING’
“There’s just a lot of small things they could do that would just be annoying,” he said.
However, since US business in China is often done through partnerships with the Chinese government, Beijing risks hurting itself if it amps up regulation on US companies as a retaliatory measure, he added.
Apple is the master of global electronics supply chains. While the company is based in the US, China has arguably become its most important market. The vast majority of Apple products are manufactured across China and the company generated more than 20 percent of its revenue there during its most-recent reported quarter.
Since launching bigger-screened iPhones in China and striking expansive wireless carrier partnerships with China Mobile and others, Apple has thrived there. The company has increasingly configured some of its hardware and software for the region — at a level beyond any customization for other markets. It also released a gold iPhone to appeal to Chinese consumers, added mobile-payment support for some of the nation’s transit systems and developed messaging features that mimic popular functions of local services like WeChat.
The company has also followed local laws, agreeing to relocate data storage for its iCloud services to state-affiliated servers in China. Apple chief executive officer Tim Cook also visits China regularly for public and private events.
It is unlikely Trump’s tariffs will immediately hurt Apple, due to its US headquarters. However, retaliatory tariffs from China might target consumer devices assembled in the nation, raising the already high price tags of the latest iPhones, iPads and Apple Watches.
DA Davidson analyst Tom Forte said that US tech companies with manufacturing in China might be more insulated from retaliation, citing Apple and its partnership with Foxconn Technology Group, which assembles iPhones in factories throughout China.
“The Chinese government would not want to do something to damage the Chinese contract manufacturers,” Forte said, adding that companies making consumer electronics generate “a lot of job growth” in the country.
Additional reporting by Emily McCormick
Because much of what former US president Donald Trump says is unhinged and histrionic, it is tempting to dismiss all of it as bunk. Yet the potential future president has a populist knack for sounding alarums that resonate with the zeitgeist — for example, with growing anxiety about World War III and nuclear Armageddon. “We’re a failing nation,” Trump ranted during his US presidential debate against US Vice President Kamala Harris in one particularly meandering answer (the one that also recycled urban myths about immigrants eating cats). “And what, what’s going on here, you’re going to end up in World War
Earlier this month in Newsweek, President William Lai (賴清德) challenged the People’s Republic of China (PRC) to retake the territories lost to Russia in the 19th century rather than invade Taiwan. He stated: “If it is for the sake of territorial integrity, why doesn’t [the PRC] take back the lands occupied by Russia that were signed over in the treaty of Aigun?” This was a brilliant political move to finally state openly what many Chinese in both China and Taiwan have long been thinking about the lost territories in the Russian far east: The Russian far east should be “theirs.” Granted, Lai issued
On Tuesday, President William Lai (賴清德) met with a delegation from the Hoover Institution, a think tank based at Stanford University in California, to discuss strengthening US-Taiwan relations and enhancing peace and stability in the region. The delegation was led by James Ellis Jr, co-chair of the institution’s Taiwan in the Indo-Pacific Region project and former commander of the US Strategic Command. It also included former Australian minister for foreign affairs Marise Payne, influential US academics and other former policymakers. Think tank diplomacy is an important component of Taiwan’s efforts to maintain high-level dialogue with other nations with which it does
On Sept. 2, Elbridge Colby, former deputy assistant secretary of defense for strategy and force development, wrote an article for the Wall Street Journal called “The US and Taiwan Must Change Course” that defends his position that the US and Taiwan are not doing enough to deter the People’s Republic of China (PRC) from taking Taiwan. Colby is correct, of course: the US and Taiwan need to do a lot more or the PRC will invade Taiwan like Russia did against Ukraine. The US and Taiwan have failed to prepare properly to deter war. The blame must fall on politicians and policymakers
RSS