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Payback: How China could retaliate for U.S. Huawei ban
Bloomberg | 2019/5/31

U.S. companies, including the Detroit 3, that count on China for a major part of their growth have targets on their backs as Beijing and Washington ratchet up trade-war tensions.

President Donald Trump¡¯s decision to blacklist Huawei Technologies Co., the Chinese maker of smartphones, while also threatening bans on other Chinese technology companies, could open the door to retaliation against U.S. brands from cars to hotels to sportswear to even Captain America. State media last week said China is ¡°well armed to deliver counterpunches,¡± without giving specific details.

As companies await China¡¯s next move, there is uncertainty about what form retaliation might take. Companies might ¡°just have to read the tea leaves on how their business operations are being treated,¡¯¡¯ Erin Ennis, senior vice president of the U.S.-China Business Council, said in an interview with Bloomberg Television.

China could use the template it honed in 2017 when relations with South Korea deteriorated over Seoul¡¯s decision to deploy a missile shield. The government curbed travel to South Korea, hurting cosmetics companies that rely on Chinese tourists, while local authorities shut most of Lotte Shopping Co.¡¯s China stores, alleging fire safety violations. Consumers boycotted South Korean products, dealing a devastating blow to Hyundai Motor Co.¡¯s sales.

There¡¯s a lot at stake, as China¡¯s fast-growing consumer market is a top priority for U.S. giants looking for growth in a slowing global economy. 

Spinning wheels
China is now the world¡¯s biggest auto market, but U.S. automakers are already under pressure there, with Morgan Stanley analyst Adam Jonas saying some firms ¡°may be operating in China on borrowed time.¡±

Sales of American cars in China fell 28 percent in the 12 months ending March, more than double the 12 percent decline in the overall market for passenger cars. General Motors Co. reported China income for the first quarter of the year of $400 million, a decline of $200 million from a year earlier.

If Chinese consumers decide to use their wallets as trade-war weapons, the impact could be even more severe. Bloomberg Intelligence estimates the political tensions could cost GM and Ford Motor Co. as much as half of their sales in China.

Past conflicts offer a lesson on the potential damage. The backlash from the Seoul missile dispute upended Hyundai¡¯s business, and the company was forced to curtail production as sales in the country plunged more than 30 percent in 2017 from a year earlier.

In a separate instance, a territorial spat with Japan flared up in 2012, resulting in nationalist crowds ransacking a Toyota Motor Corp. dealership and setting fire to a Panasonic Corp. factory.

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