The standard line from President Donald Trump and those who support his get-tough approach toward Beijing is that because China sells more to the U.S. than the other way around, Washington has the upper hand in its game of tariffs. “China buys MUCH less from us than we buy from them,” Trump recently tweeted, “so we are in a fantastic position.”The intrusive Chinese state has all sorts of levers to control the economy and society, and in an environment that lacks rule of law, officials can pull them at their pleasure. They also have far more targets to aim at than the trade data suggest. Many American companies have substantial operations within China that are tremendously important to their bottom lines. General Motors and its partners, for instance, sold more than 3.6 million vehicles in China last year, almost all of them manufactured locally. Starbucks operates more coffee shops in China than in any other market aside from the United States. These businesses are vulnerable to government-inspired nefariousness, from product boycotts and state-press smear campaigns to regulatory investigations
The Chinese have employed such tactics in the past. In 2017, for instance, China’s government waged an undeclared war against South Korean business over a dispute regarding an American missile-defense system. When Seoul rebuffed Beijing’s demands that it cease deployment of the system—which the Chinese considered a threat to their security—China tried to compel the South Koreans by pressuring their companies and economic interests.
A primary target was Lotte, a Korean conglomerate with interests in candy, hotels, retail, and other businesses. Lotte committed the crime of providing land for the missile system. The Chinese government whipped up nationalist ire against the company through the state-controlled media. One op-ed in the Global Times, a newspaper run by the Communist Party, entitled “Lotte’s Development in China Should Come to an End,” thundered that “showing Lotte the door will be an effective warning to all the other foreign forces that jeopardize China’s national interests.” Protests erupted in front of supermarkets owned by the Korean group, while inspectors ordered outlets closed after supposed violations. Sales plummeted, and Lotte eventually exited from the business. That wasn’t all. Chinese shoppers also shied away from Korean-branded cars and cosmetics. Korean pop stars were denied entry visas; group tours to Seoul for big-spending Chinese travelers were canceled.
Canada is enduring such treatment right now. Angered that Canadian authorities (at the behest of Washington) arrested the chief financial officer of the Chinese telecom giant Huawei Technologies, Beijing blocked Canada’s exports of pork and canola, pinching the country’s agricultural sector. China has taken this step even though it isn’t in its own economic interest, since its domestic pork industry has been ravaged by swine flu. Similarly, in 2012, Chinese quarantine officers began impounding Philippine bananas amid a flare-up over contested claims in the South China Sea.