Reprisals against Apple in a U.S.-China trade war would be indirect

Reprisals against Apple in a U.S.-China trade war would be indirect

If the Chinese government retaliated against tariff increases by the United States, it would not take direct aim at Apple, an economist argued today.

"For China, the best target is Boeing," said Caroline Freund, a senior fellow at the Peterson Institute for International Economics.

Freund was responding to questions after Global Times, a Chinese Communist Party-supported newspaper, warned of reprisals if President-elect Donald Trump follows through on a campaign pledge to dramatically increase tariffs on goods imported into the United States.

"China will take a tit-for-tat approach then," the paper's op-ed piece said Sunday. The editorial writers called out Boeing as a possible target, but added, "U.S. auto and iPhone sales in China will suffer a setback" if Trump boosts tariffs to his promised 45%.

When countries engage in a trade or tariff war, they don't retaliate in kind, Freund said. As in any conflict, the aim of a trade war is to strike at an enemy's most vulnerable positions. So if the U.S. raised tariffs on smartphones and laptops -- two categories in which goods from China dominate U.S. imports, China would be not hit back by increasing duties on electronics imported from the U.S.

Instead, it would target "products that would hurt the U.S. most," said Freund. "The idea is to hit back using a product that's important to me."

Chicago-based Boeing would be an obvious target, she added. "Estimates are that based on growth, China will be buying a lot of planes over the next two years. But China could just turn to Airbus."

Just two months ago, Boeing landed a $3.2 billion deal to sell a dozen 787 Dreamliners to China Southern Airlines. During a state visit to the U.S. last year, Chinese President Xi Jinping signed a $38 billion order for 300 Boeing jets.

But what of the Party paper's claim that a trade war would affect iPhone sales in China? Freund said the Chinese government could do that without resorting to tariffs, but by impeding Apple's operations in China.

"Suddenly regulators could start showing up at production facilities ... every day," Freund said. Or the government could launch tax audits. "There are all kinds of ways they can crack down on a market. And China has a history of doing that."

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