President Donald Trump tweeted on Sunday that the US is considering cutting off trade with any country that maintains economic ties with North Korea.
The remark was largely interpreted as a semi-veiled threat against North Korea’s main trading partner, China.
Several experts argued it was not a credible threat given that the policy would have severe negative effects on the US economy.
In light of the simmering tensions, however, it’s worth looking at which sectors and products in China could get hit the hardest in the event that Trump’s proposed measures were implemented.
HSBC’s Kelvin Ho-Por Lam, economist for Greater China, and Qu Hongbin, chief economist for Greater China, published a note Tuesday looking at the potential impact on China should trade frictions between Washington and Beijing arise.
In the note, they included two charts looking at the top 20 exports from China to the US in 2016, and the top 20 exports from the US to China in the same year.
“China exports huge amounts of labour intensive goods to the US, including toys, furniture, clothing and footwear, while electronics and high-tech products such as computers and mobile phones are also among the top five most exported items,” they wrote.
HSBC’s economists also noted that the US recorded a large trade deficit in sectors where China exported the most goods.
“We think these export items which contributed to the deficit are the most vulnerable to potential US trade action,” they said. “Other potential targets include solar panels, steel, and aluminium.”
They illustrated that point via another chart showing the US trade imbalances with China by product in the 12 months leading up to June 2017, which we shared below.