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US tech firms may feel brunt of China’s trade counter attack

With no end in sight for the Trump administration’s trade war with China, which escalated on Tuesday with an announcement that an additional US$200 billion in Chinese goods will face tariffs, the discussion about how China will respond is heating up.

While China does not export enough goods to the US to match the value of the announced tariffs, combining US corporate revenue inside China with exports would give America a trade surplus of US$20 billion, according to research from Deutsche Bank cited by Bloomberg.

That means that US companies working inside of China may be about to feel the wrath of the Chinese government – and consumer.

Beijing recently indicated that its response to more tariffs would include “qualitative” measures, which many analysts interpreted as creating regulatory hurdles or even stoking anti-US sentiment among consumers of US products. Such tactics have been used in the past to target Japan and, more recently, South Korea, in response to political disputes.

For companies such as Starbucks and Apple, which rely on the Chinese market, the consequences could be devastating.

For Qualcomm, an acquisition deal that was reportedly approved by Chinese authorities earlier this year might be in jeopardy, as Bloomberg noted today.

The tech sector, more broadly, will suffer from tariffs due to the nature and complexity of the international supply chain that it relies on.

So far, China has been measured in its response to the new US trade policy. Beijing did not retaliate when the US placed tariffs on steel and aluminum products. While China matched tariffs on US$34 billion in goods, dollar-for-dollar, state media coverage of the trade war has been relatively subdued.

The tariffs on an additional US$200 billion in Chinese goods won’t go into effect for another several months, so China has time to load their non-tariff weapons.

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