U.S. and Chinese officials launched yet another round of trade talks this week aimed at easing economic tensions between the two nations. Although Chinese President Xi Jinping and President Donald Trump reached a trade truce at the G20 meeting in Argentina earlier in December, many of the specifics of that deal remain to be negotiated.
Earlier this week, Beijing made its first purchase of U.S.-grown soybeans in about six months as a show of good faith in the negotiation process. Nonetheless, there are ample ways in which the talks could break down. If that does happen, and if a trade war between the U.S. and China becomes a reality, it's likely that some industries will be hit harder than others. Below, we'll examine some spheres which may be most susceptible to this impact.
One of the biggest areas affected by trade tensions is the U.S. automotive industry. Remember that earlier this year, China increased the tariffs on U.S.-made automobiles entering the country from 15 percent to 40 percent. In the time since that tariff, car sales in China have fallen for the first time in years.
But U.S. automakers, like Tesla Inc. (TSLA), also bear the brunt of trade tensions. The electric automaker had to raise the price of its Model S and Model X cars by $20,000 in July after a new round of trade tariffs. At this point, China has begun to walk back tariff increases, confirming that they would "suspend the additional tariffs on US vehicles and auto parts for three months" starting Jan. 1, 2019. If tensions should flare up again, however, you can expect that China will hit the automobile industry with another round of tariffs.
Tech and Telecommunications
Chinese smartphone maker and telecommunications company Huawei has been threatening Apple Inc. (AAPL) for many months, even prior to the relatively recent trade dispute. Earlier this month, Huawei's CFO Meng Wanzhou was arrested in Canada on charges of fraud related to the alleged use of a shell company to bypass U.S. sanctions with Iran. While this incident in and of itself might have caused a bit of drama between competing companies, the combination of personal tension and trade negotiations has exacerbated the issue.
China responded by granting an injunction against Apple on behalf of rival U.S. company Qualcomm (QCOM) as a result of patent issues, according to a press release from Qualcomm. As a result, China is banning the import and sale of many iPhone models. The timing was auspicious for Chinese authorities looking for a way to threaten a major U.S. business, or maybe the injunction would have come about anyway as another line of offense in the ongoing trade battles. In either case, Apple and other U.S. tech companies doing business in China may see fewer sales as trade tensions escalate.
Agricultural products including grains, seeds, and fruit are among the top three U.S. exports to China according to the Office of the United States Trade Representative. In 2017, the U.S. exported roughly $13 billion worth of these goods to the Chinese market. As trade tensions have ebbed and flowed, however, one key buzzword has been soybeans. Traditionally, China has been the largest importer of U.S. soybeans, with billions of dollars going into the industry each year.
Earlier this year, Chinese officials imposed an added tariff on U.S. soybeans. American soybean farmers were put in a bind, with huge stockpiles of product that they couldn't sell. Given that soybeans have become a token of the trade war between the U.S. and China, it seems fitting that the latter country would make a show of good faith by buying $180 million worth of the soybeans from the U.S. But if China slows down or stops its purchases of U.S. agricultural products again in the future, farmers and related industries will likely feel the squeeze.
Is There an End in Sight?
There's no telling whether we've already witnessed the highest points of tension between U.S. and Chinese officials in the battle over international trade. If so, the auto, tech, and agriculture industries may have a smoother road ahead. On the other hand, if precedent has taught us anything, it's that nothing is certain when it comes to trade wars. If the dispute rages on, these industries could be hit the hardest by new rounds of tariffs — and Chinese officials know it.