The News
The cascading effects of US-China trade tensions are set to hit global markets and corporate boardrooms harder than ever in 2025.
On Thursday, Beijing added 28 US defense contractors to an export control list, including Raytheon, Boeing, and Lockheed Martin. Many were already subject to Chinese sanctions, but the latest targeting reflects an escalation in tit-for-tat restrictions from both Beijing and Washington that has put multinational corporations on high alert at the start of the new year.
SIGNALS
Consequences of escalating trade war already being felt
The US-China trade war escalated sharply in 2024, and experts predict that trend will persist under incoming US President Donald Trump. The Republican is expected to take a more aggressive, albeit unpredictable, approach to China. Much of the economic blacklisting so far has been symbolic, but some impacts are tangible: A Chinese tech supplier for Apple is now scrambling to sell off its Apple and Samsung operations after being targeted by Washington. Beijing has shown willingness to retaliate against US companies, although it’s unlikely to do anything that would hurt the Chinese economy, analysts said. Still, “the pace of things are picking up. The drumbeat of these things is going to be more frequent,” a China expert said.
Corporations thinking more about US-China relationship
The costs of doing business globally have reached a 10-year peak, according to a recent analysis from a UK consultancy. “The old playbook, focused on market size, costs and efficiency, has been upended. Now, geopolitics is the driving force,” an Asia analyst said. The US-China relationship, particularly, “dominates corporate concerns,” The Wall Street Journal wrote. US executives have largely stopped advocating for Washington to soften its stance toward China — a shift from Donald Trump’s first term — as China’s economy has faltered and US companies find it increasingly hard to do business there. It’s unclear how that dynamic will develop under Trump’s second term, however: “I don’t think anyone has a playbook at this point in time,” the head of the Committee for Economic Development said.
Auto industry bracing for more upheaval
The automotive industry, especially the electric vehicle sector, has been at the forefront of recent US-China tensions. Europe’s market has been upended, too, with competition from Chinese companies leading to high tariffs for EV imports. But such protectionism seems “like a Band-Aid, given the global reordering going on,” Bloomberg energy columnist Liam Denning wrote: China’s EV sector will still make inroads elsewhere, especially in Southeast Asia. Denning predicted that 2025 will be a “year of restructuring,” as industry giants fight to get their bearings: General Motors just suffered a $5 billion write-down in China; Nissan and Stellantis are struggling; and even China’s auto industry seems due for an overhaul amid the country’s economic challenges.