Updated Jul 11, 2018

The bottom line: China's trade war doesn't stop at tariffs

Walmart in Beijing. Photo: Zhang Peng/LightRocket via Getty Images

In terms of dollar value, the U.S. imports nearly four times as many goods from China as China does from the U.S., but Beijing has an arsenal of trade war weapons beyond tariffs that it could implement if the fight escalates, reports Bloomberg.

Why it matters: President Trump's latest threat of an additional $200 billion in tariffs could prompt China to unleash its non-tariff weapons.

What to watch:

  • The Chinese government could interfere with American companies' plans for expansion in China. Walmart and General Motors are both vying for the Chinese market, and Tesla has just announced plans for a massive factory there.
  • Beijing could increase regulatory oversight of American companies operating in China.
  • Chinese consumers could be directed to boycott certain U.S. products in retaliation.
  • American companies could also see canceled orders of goods, holdups at Chinese customs at ports or slowed-down approvals processes for building factories.
  • China has done this before. "Japanese automakers took a major hit in their China sales in 2012 after the fight over disputed islands in the East China Sea worsened ... China put a huge a dent in tourism in South Korea by banning package tours in 2017 amid a dispute over a missile shield," Bloomberg's Enda Curran writes.
  • The nuclear option, per Curran, would be for China to "offload some of its huge hoard of U.S. Treasuries."

The bottom line: China's sharpest weapon against the U.S. is its market leverage over American companies. Limiting access to Chinese consumers through non-trade barriers could hurt American firms' profits.

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