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Pity American firms in China. Xi Jinping is hitting back

From Apple and Boeing to Nike and Starbucks, there is a lot of money at stake

Illustration: Juanjo Gasull

Illustration: Juanjo Gasull

For decades politicians in Washington might have been mistaken for lobbyists for American companies in China. They pushed for the country to be opened up to American banks, planes and fast-food chains. Boeing, an American plane manufacturer, for example, began receiving orders from China just after Richard Nixon visited the country in 1972. Now many American executives in China believe they are witnessing their government dismantle much of that work.

Donald Trump’s heavy use of tariffs is rendering their supply chains untenable. Retaliation by the Chinese government threatens to unwind years of commercial success. On April 15th China’s aviation regulator told airlines to stop taking deliveries of aircraft from Boeing, according to Bloomberg, a news agency. The symbolism of the move will not be lost on American bosses in Shanghai or Beijing.

American firms in China are still attempting to get a grip on what the future will look like. Tariffs on Chinese imports stand at 145%. On April 11th the White House announced exemptions on consumer electronics, to the great relief of companies such as Apple. Since then, however, the president has said these are temporary, valid until the results of a probe into semiconductors, electronics and pharmaceuticals. And on April 16th America clamped down on Nvidia's sale of ai chips to China.

China has matched America’s increases, with duties of around 125%, but said recently that it would no longer respond to new tariffs because, given much higher prices, the market for American imports had already disappeared. At the same time Chinese regulators have launched investigations and added American companies to lists that will disadvantage their operations in the country. Companies such as Boeing can expect rapidly falling orders or cancellations. An American executive describes the trade war in one word: “destruction”.

Mr Trump cites a goods trade deficit with China of around $300bn in 2024 as one justification for tariffs. American bosses in China view things differently. Revenues in 2024 for American listed companies that report Chinese sales were around the same amount. Apple, Nike and Starbucks are omnipresent; Tesla, an electric-vehicle maker, sold around two-fifths of its cars in China in the first three months of this year. Their local operations employ tens of thousands of often highly skilled workers. By comparison, Chinese firms in America have been far less successful, bringing in just $50bn in revenues last year. Spotting a Chinese consumer brand on the streets of an American city is a rare event.

For American executives, operating in China just became far more challenging. Over the past few years many have been reducing investments (see chart), driven out by unfriendly policies and low interest rates. In future it will be American policy inhibiting investments.

Chart: The Economist
Chart: The Economist

Most American firms with complex supply chains are still reeling from the impact of the pandemic, during which many sought to end total reliance on Chinese manufacturing by setting up in other countries in the region. This partial diversification may work against American firms as the trade war sets in. Vietnam, for instance, has proposed stopping the rerouting of Chinese goods in exchange for Mr Trump lowering tariffs, according to Reuters, a news agency. This means that American firms operating between the two countries could face even higher tariffs.

American bosses will also have to contend with the wrath of the Chinese state. Since 2019 regulators have developed a sophisticated legal framework for striking back against companies and countries. These include sanctions for following other countries’ sanctions, export restrictions and an “unreliable entities list” (uel), which, when a company is added to it, can stop its staff from entering the country and block it from doing trade with China. According to a paper by Evan S. Medeiros of Georgetown University and Andrew Polk of Trivium, a consulting firm, these three mechanisms were used 15 times in 2023, but 115 times last year. In the first two and a half months of 2025 alone additions to the uel and export controls have been deployed around 60 times.

New forms of retaliation are becoming clearer. On April 8th an unofficial list of six measures began circulating on Chinese social media. Some are relatively straightforward, and suggest bans on the imports of American poultry and soyabeans as well as the suspension of all talks on policing the trade in fentanyl. Another suggested halting the imports of American films. The list also included a crackdown on American-owned intellectual property (ip) and professional services, such as law firms. The list was written by two well-connected bloggers. Two days later the film regulator announced that it would reduce the number of American movies it allows into China, suggesting the posts were based on reliable information.

The list may also bring more clarity to an announcement made on April 4th concerning a Chinese investigation into DuPont, an American chemicals group. DuPont has clashed with China on ip issues for many years. The probe into the company alleged unspecified monopolistic practices, leading some analysts to believe that the investigation could be an attack on its ip within China. Multinationals have previously sought ip protection as a prerequisite for investing in China. Any sign that those promises will be rolled back would be devastating for all foreign firms, not just American ones, says a company adviser.

An assault on American services, meanwhile, has yet to materialise fully. Any such measures could damage the ability of other American firms to operate. Law firms, banks, advisory firms and accountancies are a backbone for commerce. China has already made it hard for some of these services to function. Corporate investigations, for example, have become riskier as regulators have tightened rules related to national security and the types of information that can be disclosed. Many law firms have already scaled back or closed offices. If this pressure is increased, says one lawyer in Beijing, the ability to deal with Chinese companies will be hampered.

In the past American law firms might have been backed by their government when facing such challenges. But Mr Trump has launched a crackdown on law firms in America that have investigated him in the past. It is unlikely that he will be sympathetic to their plight in China.

The Chinese government will have to tread carefully as it imposes punishments on American companies. Hurting Apple or Tesla will inevitably hit local manufacturing capacity and lead to layoffs. Other foreign firms might be spooked by probes into American counterparts. This could also hurt the Communist Party's efforts to attract foreign investment and keep the private sector onside. But there are clear benefits for Chinese firms, too. Some American bosses fear a backlash against their consumer products, driven by the Chinese government or by ordinary consumers. Huawei, a local tech giant, may gain at Apple’s expense.

In this sense the trade war could be a gift to China’s leaders. Local consumers adore American culture and American goods; many have ignored the state's attempts to promote local brands. The rage Mr Trump has directed towards China will make the Communist Party’s job of purging the country of American brands and companies all the easier.  

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Source: The Economist

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