Tightening the Screws: How US-China Trade War Backfired on American Firms

Beijing has reportedly adopted "qualitative" measures and started to tighten the screws in regard to American companies operating in China. Speaking to Sputnik, Russian and Chinese analysts suggested that China would not agree to compromise, despite the pressure exerted by Washington.

The US-China trade war has started backfiring on American companies working in China.

"Unfortunately, the scenario that China and the US would resolve the contradictions and refuse to escalate, at least, customs barriers, has not come true," Alexander Salitsky, Moscow-based economist and analyst at  the Primakov National Research Institute of World Economy and International Relations (IMEMO) of the Russian Academy of Sciences (RAS), told Sputnik China.

Salitsky referred to the case of the ZTE Corporation, stressing that Washington's pressure had triggered a tit-for-tat reaction.

"American companies that are operating in China are very closely linked to the local market," he explained. "They can receive some components from the US, but their sales in the Chinese market are quite huge. They are estimated at about $200 billion. This is a significant amount. Therefore, I believe that the Chinese will resort to 'guardianship' of foreign business while seeking a sort of symmetrical response to the United States' measures."

On August 5, The South China Morning Post reported about "precision strikes" on US businesses in China. According to the media outlet, "some American firms have faced higher costs and much greater regulatory scrutiny" in wake of the growing tensions between Washington and Beijing.

The media outlet suggested that while China is unlikely to win the tariff war directly, given the fact that it imports less from the US than exports to it, Beijing has resorted to "qualitative" measures, such as unnecessary delays in accepting American goods by China Customs, longer quarantine periods at airports and a diversification of supply chains away from US products.

"What will happen to the American companies operating in the Chinese market?" Salitsky asked. "Perhaps, they will start adapting to the new realities. Perhaps, some of their units will be withdrawn from China to other countries, or maybe to the US."

However, some observers doubt that American companies will abandon the lucrative Chinese market any time soon due to the steady growth of China's economy and the country's middle class.

Chinese workers stand on a pier before a cargo ship at a port in Qingdao, east China's Shandong province on April 13, 2017

© AFP 2023 / STR

How Southeast Asia Could Benefit From US-Chinese Trade War

Meanwhile, the countries of Southeast Asia are ringing the alarm over the ongoing trade war between the US and China. First of all, this applies to Malaysia, Singapore, the Philippines, Thailand, Vietnam and Indonesia, whose economies are most closely tied with China.

For instance, Indonesia, the largest economy of Southeast Asia, adopted preventive measures in July aimed at minimizing the consequences of the Sino-American tariff frictions.

However, Zhang Ning, an expert at the сenter for financial strategy at the Chinese Academy of Social Sciences, believes that the recent trade spat will play into the hands of Southeast Asian nations.

"The trade dispute between China and the US, or the escalation of the trade war, in fact, can bring certain benefits to the countries of Southeast Asia," Zhang opined. "Of course, the situation affects the import and export trade between China and the United States, but it makes trade and economic exchanges between China and Southeast Asian countries closer."

The only thing ASEAN countries could be concerned about is Washington's potential decision to expand its protectionist trade policies to Southeast Asia, he presumed. "So far, at least, the escalation of the Sino-US trade war is objectively slightly beneficial for Southeast Asian countries," the Chinese scholar added.

According to Zhang, the Chinese government will not agree to compromise "in the face of unreasonable demands from the US." He suggested that the Trump administration's approach could cause great damage to the interests of both sides.

The US-China tariff war escalated in March 2018 when the Trump administration announced high tariffs on steel and aluminum. The White House also adopted additional punitive measures against China, citing alleged unfair trade practices by Beijing. The two countries have imposed tariffs on tens of billions worth of imports, targeting each other's businesses. On July 20, Donald Trump threatened Beijing with the imposition of tariffs on all $505 billion of imported goods from China.

The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.