American firms generate about 5% of global sales in China. A rupture between the two giants would hurt America Inc too
term in office, Donald Trump has often bashed China while occasionally praising its leader, Xi Jinping. Similar two-mindedness characterises his administration. China hawks, led by Robert Lighthizer, his trade representative, and Mike Pompeo, the secretary of state, have tussled for influence with more dovish figures such as Steven Mnuchin, the treasury secretary, who have tried to prevent a rupture between the two giants.
All this marks an escalation in the economic war between the two countries. The fallout could be gargantuan. Deutsche Bank reckons that lost revenues in China, the expense of moving factories out of the country and compliance with the Chinese and American technospheres’ diverging standards could cost global technology firms $3.5trn over the next five years. A large chunk of that burden would fall on American firms.
Second, many of the Trump administration’s anti-Chinese actions may be hard to unwind, even if president’s challenger, Joe Biden, wins the White House for the Democrats in November. As facts on the ground have changed, Sino-American commercial relations have undergone fundamental change in the past two years, says Edward Tse of Gao Feng, a consultancy.
The Chinese would not be the only victims. American firms have robust and growing businesses in China, where they generate about 5% of global sales. Despite trade tensions Americanin China actually rose in 2019. Before the pandemic Nike’s Chinese sales of sporting goods had grown by double digits for 22 straight quarters.sells more cars in China than in America. Tesla may make between 25% and 40% of its electric cars in China next year, reckons Bernstein, a research firm.
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