China Has Readied a Trade-War Arsenal That Takes Aim at US Companies

In the years since President Trump's first trade war with China, Beijing has built an arsenal of tools to hit the U.S. where it hurts. Now, it is getting ready to deploy them in full.

- Lingling Wei

On Wednesday, China said it would increase tariffs on all U.S. imports to 84%, a response to new U.S. tariffs on Chinese imports of 104% that went into effect at midnight. It also added six U.S. companies, including defense and aerospace-related firms Shield AI and Sierra Nevada, to a trade blacklist, and imposed export controls on a dozen American companies, including manufacturer American Photonics and BRINC Drones.

While Trump has focused on tariffs as his trade weapon of choice, China's strategy goes well beyond imposing its own levies, relying on the lure of the Chinese market for U.S. companies. A central thread running through its calculus is how to inflict hardship on companies that bank on their ties with the world's second-largest economy.

Tools that Beijing has already used and is likely to expand include export controls of critical materials, American companies use to make chips and defense-related products, regulatory investigations designed to intimidate and penalize U.S. companies, and blacklists intended to bar U.S. businesses from selling to China. In addition, authorities are preparing new ways to pressure American companies to give up their crown jewelsintellectual property-or lose access to the Chinese market.

The toolbox underscores leader Xi EET JOURNAL Jinping's capacity to engage in a prolonged economic warfare with the U.S. As both capitals appear to move toward decoupling, it also highlights the ever-rising risks for U.S.companies operating or investing in China, or simply trading with the country.

"China has systematically put together a new arsenal of tools that's intended to minimize the cost to China and maximize the pain on the U.S.," said Evan Medeiros, a former senior national-security official in the Obama administration and now a professor at Georgetown University. "They're prepared in a way that gives them an asymmetric advantage in the trade war."