What is in this article?:
- Trumpâ€™s China Policy Threatens U.S. Exports and Supply Networks
- Supply Networks
The nightmare scenario would be a Chinese economic embargo of Taiwan that would reverberate around global supply chains.
Donald Trump’s suggestion that the decades-old “One China” policy could be used as a bargaining chip to win future trade concessions from China is a brash negotiating ploy loyal viewers of “The Apprentice” might appreciate.
Yet for U.S. executives with big economic stakes in Greater China, that kind of bravado poses huge forward risks if the president-elect is anywhere near serious. Any move to elevate the international status of Taiwan, which China views as a renegade province, would likely elicit an immediate and forceful response and endanger a two-way trade relationship that reached $627 billion in 2015.
China has obvious leverage of its own: namely, the $145 billion in planes, computers, machinery, chemical and agricultural products and array of services that U.S. companies imported from the mainland in 2015. Beijing also has enormous clout over Taiwan, whose economy is steadily becoming intertwined with the mainland.
Beyond slapping outright tariffs on incoming American goods, Chinese leaders also have far more subtle weapons at their disposal, such as selective enforcement of anti-monopoly laws, business regulations and government procurement tenders that can quickly tilt the playing field to European and Asian rivals of U.S. multinationals. The U.S. ran a $337 billion trade deficit with China last year.
“People feel off-balance right now. When there is a sour relationship between the U.S. and China, everyone is affected,” said Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai. “State-owned enterprises in China have considerable purchasing power and they’ll be influenced by the government tone, or get specific directives, to avoid American businesses. People will try to read Beijing’s mood and that’ll shape economic activity.”
American executives, not to mention their Chinese counterparts, fear the business impact of Trump’s cavalier talk of upending the long-standing One China policy, in which the U.S. severed formal diplomatic ties with Taiwan in 1979 and recognized the People’s Republic of China.
Optimists hope Trump’s China policy will become more nuanced once he’s in office. “The talk of the U.S. shifting its recognition to Taiwan seems likely to be just talk,” said David Dollar, a senior fellow at the Brookings Institution in Washington and former U.S. Treasury attache to Beijing. “If the U.S. goes down that road, other countries are definitely not going to follow.”
Already, Chinese billionaire Wang Jianlin, chairman of the Dalian Wanda Group Co., has said that the jobs of his 20,000 U.S. employees would be in jeopardy in the event of a trade war, speaking at a recent conference in Beijing. “To deal with Trump’s threats, China has a full toolbox,” warned an editorial last week in the Global Times, a newspaper published by the state-run People’s Daily group and known for its hawkish, nationalist tone.
Among the most vulnerable would be Silicon Valley tech giants with extensive supply networks in Asia, particularly Taiwan. “Technology companies are quite nervous,” said Eric Huang, a board member of the Monte Jade Science and Technology Association in Silicon Valley who is also chief executive of a startup accelerator.