China might have already begun the US-China trade war

Beijing might be quietly meddling with US businesses in China ahead of the opening rounds of tariffs.

The first shot in President Donald Trump’s trade war with China is about to be fired.

On Friday, the Trump administration will initiate tariffs on $34 billion worth of Chinese goods. China is expected to respond immediately with tariffs hitting the same amount of American goods.

But ahead of those official opening salvos, it looks like Beijing may have already begun to quietly meddle with the way US businesses operate in China.

According to the Washington Post, there are several recent examples of Chinese regulators giving American companies an unusually hard time as they try to get their goods to market — and it appears that it could be part of a government-backed coordinated campaign.

Per the Post: An American company that sells cherries had a load held up in inspections for a week; they were delayed so long that the cherries went bad and had to be sent back home. A vehicle manufacturer saw random border inspections of their products double in the past month. Pet food makers say that they’ve seen more intense inspections, which is delaying the distribution of goods to store shelves. And companies across the board are complaining about delays in worker visas and licensing applications.

It’s possible that the seeming uptick in regulatory scrutiny and enforcement is just a coincidence. But experts have long warned that Beijing could use these kinds of tactics if a trade war with Washington broke out, and now they’re starting to think that may already be happening.

“There’s enough of a trend to say this might be related,” Jake Parker, vice president of China operations at the US-China Business Council, told the Washington Post.

Trump has insisted on many occasions that trade wars are “easy to win,” especially when when the US sells more goods to another country than that country sells to the US — as is the case between the US and China. The logic is that even if the other country wants to match every US tariff with tariffs of its own, the US ultimately has more targets to choose from for tariffs since it buys more goods.

But the possibility that China could be using regulations to interfere with US companies is a reminder that tariffs aren’t the only weapons other countries have in their arsenals. Ultimately the fight with China could be far more costly for the US than Trump anticipates.

China isn’t as defenseless as Trump thinks

The US has a huge trade deficit in goods with China. Last year, China imported $130 billion in goods from the US, while the US purchased around $500 billion from China.

That makes it so that China has a limited ability to match Trump’s taxes on its goods with reciprocal taxes on US goods. Trump has threatened to put tariffs on up to $400 billion in Chinese goods; China simply doesn’t import enough from the US to match that.

But China has other ways of punishing Trump for dealing a blow to Chinese exports.

William Reinsch, a trade expert at the nonpartisan Stimson Center, told me in an interview in January that China could interfere with US supply chains based in China. For example, officials could slow or shut down the assembly of Apple iPhones, which are manufactured in China, perhaps by invoking obscure safety rules or delaying the shipment of the phones out of the country.

They could also crack down on Chinese companies that manufacture components that iPhones rely on. That could make iPhones more expensive and hurt Apple’s share price.

China could also make life harder for US companies looking to get a foothold in the Chinese market — for example, by being more generous in giving European businesses licenses to operate in China, thus giving them a leg up over American companies.

China can also employ non-economic pressure tactics to make Trump rethink his tariffs. Beijing could, for instance, decide to stop helping the US put economic pressure on North Korea to try to rein in its nuclear program by neglecting to enforce sanctions. That would be a major blow to one of the fundamental pillars of the Trump administration’s approach toward North Korea.

Trump sees sweeping tariffs on Chinese goods as a blunt tool for getting the country to reconsider some of its unfair trade practices, like forcing US companies to transfer their intellectual property to Chinese companies just to be able to enter the Chinese market. And it’s possible that they could work, to some extent.

But Trump’s nonchalant language about how easy it is win a trade war and his single-minded fixation on trade deficits suggests he might be underestimating the costs of his strategy.