U.S.-based companies need to gear up for growing tensions between President Trump’s administration and China.
Thursday afternoon, Trump signed orders authorizing stiff and sweeping tariffs on steel and aluminum imports, including from China. And word is, Trump is considering a broad range of curbs on Chinese imports, from shoes and clothing to tech gadgets.
Such moves may spark retaliation from Chinese President Xi Jinping that could lead to a Chinese backlash against some of America’s largest businesses. These are a few of the companies that are most at risk:
Chinese consumer outraged by Trump’s actions will likely target one of the U.S.’s most visible brands in the country: Starbucks (NASDAQ: SBUX).
China has become SBUX’s second-largest market – and the source of much of the company’s recent growth. The company is opening a new location in the country approximately every 15 hours, and just recently opened its largest store in Shanghai, a 30,000-square-foot Starbucks Roastery and Tasting Room.
The Chinese market is critical for Starbucks, and the timing of a trade dispute couldn’t be worse for the company.
Apple & Other Tech Companies
Electronics are one of the biggest slices of U.S.-China trade.
And Apple (NASDAQ: AAPL) may well have the most to lose if Trump’s tariffs define imported good as all items produced in China. The company makes most of its gadgets, including iPhones and iPads, in China via partners like Hon Hai Precision Industry, a part of Taiwan’s Foxconn Technology Group.
Chinese consumers respond swiftly to geopolitical tensions, and cars are no exception. Last year, a spat between China and South Korea over an antimissile system saw sales of Hyundai and Kia cars plummet in China.
Much like Starbucks, for Tesla (NASDAQ: TSLA), a trade war would complicate the company’s efforts to expand in the Chinese market. Tesla has been struggling to strike a deal to open a factory in China, a move that would help the company scale and help it reduce manufacturing, labor, and shipping costs.
For Ford (NYSE: F), it’s already struggling with its China business with sales falling 6% in 2017. Ford is also planning to invest more than $750 million in China. Given both of these circumstances, the automaker is vulnerable to a sudden downturn in U.S.-China relations.
And GM (NYSE: GM)? It sells more cars in China than Ford which means it has at least as much to lose.
Boeing (NYSE: BA) projects that China will need 7,240 new planes in the next two decades, a need that is valued at almost $1.1 trillion. However, if China’s leadership retaliates by punishing American companies, Boeing would be one of the easiest targets since the Chinese government controls most of the company’s customers in China.