US companies from Boeing to toy-makers could suffer if China retaliates beyond a $3 billion counter-punch to President Donald Trump's tariffs on the world's second-biggest economy.
US sectors including farming, petrochemicals and freight may take a hit if trade tensions between the two super-powers worsen and China takes retaliatory measures, according to a S&P Global Ratings report released on Tuesday. The study analysed the near-term effects of possible US tariffs and retaliation from China.
"More aggressive moves could escalate into a full-blown trade war between the world's two largest economies-with spillover effects on global business confidence, investment, and growth," Terry Chan, managing director of S&P Global, said.
US and China are locked in an escalating trade spat that has shaken global markets. The Trump administration intends to impose tariffs on $50 billion of Chinese imports to punish China for allegedly stealing US intellectual property. The US president wants from China more market access, lower tariffs and protection for intellectual property to reduce the trade deficit with the country. The US has about $130bn in exports to China and its trade deficit with the Asian country hit a record of around $375bn last year.
Boeing, which last year had 23 per cent of its plane deliveries to Chinese airlines or leasing companies, is a key target in the trade war.
It has "the most to lose" within the aerospace and defense industry if China sought to punish the planemaker as a form of retaliation, according to the S&P report. Boeing could lose long-term business to its arch-rival European aircraft manufacturer Airbus, which could gain a bigger portion of future orders from the Chinese state-owned airlines.
The US toy industry could be "materially affected" by the tariffs given that most toys are made in China, the report said. For some toymakers, about half their cost of goods sold would be affected and it is unlikely that all of the increase in cost can be passed onto customers.
Chinese retaliation through soybean tariffs would "significantly" affect US agricultural sector and hurt farmers. China is the biggest buyer of US soybeans and there will be an "initial and possibly severe" short-term hit to profits.