A trade war with China wouldn’t just threaten state economies, but US corporations too.Even as protectionist measures help U.S. workers, many businesses would lose cash they’ve invested in China and a key market for their products. Those losses could hit workers back in the U.S. too and raise prices for consumers.
Details on the trade war with China are few, but we assume it could affect foreign direct investment by U.S. firms, the export of goods to China, and Chinese access to U.S. markets.
This list is in no way exhaustive, but provides some examples of companies that would feel pressure from a trade war between the U.S. and China.
Business with China: Production
Wal-Mart buys a great deal of its products from Chinese producers, which it sells in the American market. Those prices are seeing increases as China attempts to hold onto the yuan's competitive exchange rate with the dollar.
Trade War Risk: If the U.S. puts up tariff barriers on Chinese imports, or the yuan appreciates in value against the dollar, Wal-Mart's cheap supply of imports may be cut off, impacting sales.
Business with China: Production and retail sales
Nike produces goods in China, but is also a growing retail brand in the country.
The company saw and 11% increase in demand for its goods in China this fiscal year.
Trade War Risk: Nike risks problems if the U.S. attempts to alter its currency relationship with the yuan, as it could make its goods more costly and less competitive in the U.S.
Business with China: Production
Target produces a great deal of the goods it sells at its U.S. retail stores in China.
Trade War Risk: If the cost of producing those goods in China increases via tariffs or currency fluctuations, Target will have to pass that on to U.S. consumers, hurting sales.
Business with China: Production and sales
Ford just signed a deal for a new engine plant to open in China by 2013, at a cost of $500 million. The goal of the plant is to help Ford produce more cars in China for the Chinese market.
Trade War Risk: Ford might be discouraged from such investments if currency fluctuations impact the costs and profits from such a program. Tariffs could slow down the wider Chinese economy, and limit car sales.
Business with China: Retail
The Gap's expansion in Chinese retail is the main part of their emerging markets strategy, with new shops set to open in Shanghai and Beijing this year. The company also plans an online retail story.
Trade War Risk: Restrictions on foreign investment by U.S. firms or currency irregularities could halt Gap's expansion in the country.
Business with China: Retail sales
Starbucks currently has plans in place to open thousands of stores in China. The company already has 376 stores in China.
Trade War Risk: Any crimp on Starbucks ability to invest in China, or fluctuations in the currency that would impact the company's bottom line, could hit its gains now and expansion plans in the future.
Business with China: Sales, foreign direct investment
Coca Cola has been extremely aggressive in its moves in China. Having already agreed to invest $1 billion in the country in 2008, Coca Cola decided to put another $2.5 billion into the country over the next three years.
Trade War Risk: Any Chinese moves that would crimp foreign direct investment, like restrictions on capital inflows, would hit Coca Cola's growth strategy.
Business with China: On site casinos
Las Vegas Sands is already getting in trouble for allegedly siphoning off funds from its Hong Kong subsidiary, Sands China.
Trade War Risk: Sands China might be forced to become more independent, unable to provide cash flow to its American ally, if China were to take a more aggressive stance in how it regulated foreign investment.
Business with China: Sales in China, domestic production in China
Molson Coors just inked a $40 million stake in a Chinese brewing company with the aim to increase the reach of its Coors Light brand in the country.
Trade War Risk: An increase in controls on foreign direct investment by China could inhibit further Molson Coors growth.
Business with China: Production in China and Export to China
That being said, Caterpillar claims to be an net exporter to China. So an increase in tariffs might cut margins on those products sold in China and actually force more business to move on shore, and out of America.
Business with China: Production and Retail
China is key to the production of several Apple products. The company Foxconn, which was recently caught up in a suicide scandal, produces iPads and iPhones.
China is a key emerging market for Apple. iPhone sales have grown dramatically in China, and the company is in the midst of a retail expansion there.
Trade War Risk: Any Chinese cramp down on foreign direct investment, or tariffs meant to keep production in the U.S., would hurt Apple.
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