Economy

What Companies Get Hit If Trump Aims Protectionism At China

If Washington cracks down on Chinese imports, Beijing is sure to respond in kind. Companies that would suffer include makers of everything from sneakers to semi-conductors.

Port of Oakland (California)
Port of Oakland (California)
Jeanny Yu and Eric Lam

HONG KONG — With the arrival of China-bashing Donald Trump as president in the White House, analysts are drawing up lists of winners and losers from any eruption of tensions between the world's top two economies.

It's still far from clear how plans will shape up under Trump, who on the campaign trail blasted trade deals with China that generated record U.S. deficits. What is clear: China will retaliate against any protectionist steps — not only are there reported contingency plans, but the historical example of measures against Japan when tensions flared in 2012.

Widespread boycotts of American products in China could hit brands including Nike, General Motors, Ford and Tiffany & Co., while U.S. sanctions would put Chinese electronics exporters such as Lenovo Group and ZTE Corp. under pressure, according to Credit Suisse Group. Domestic competitors stand to gain from diminished commerce.

"Most people I talk to tend not to think a trade war is the base-case scenario — they treat it as a black swan event," Hao Hong, an analyst at Bocom International Holdings based in Hong Kong, said in a phone interview. "I think the possibility is much larger."

Trump has pledged to use "every lawful presidential power to remedy trade disputes' with China, including tariffs. He once broached a tax of 45 percent on Chinese imports, then denied bringing it up. After the presidential inauguration Jan. 20, the Global Times, a Chinese newspaper run by the Communist Party, said Trump's speech signaled a "high possibility" of trade frictions.

The MSCI China Index could fall by as much as 30 percent from current levels if the U.S. and China impose 45 percent tariffs on each other, according to Jonathan Garner, a Morgan Stanley strategist based in Hong Kong. In the case of more modest 5 percent tariffs, the Chinese index would be little changed from current levels, according to Garner. Last month, Garner was a bull on China shares, seeing the Shanghai Composite rising to as high as 4,400 this year. The gauge rose 0.4% to 3,136.78 on Monday.

Bocom's Hong expects the benchmark Shanghai Composite Index to quickly fall below 2,800 under a full-blown trade war scenario — about a 10% slide from current levels. The U.S. S&P 500 index is "too bullish" and has gotten ahead of itself since Trump's November election, Hong said. In December, he said his model projected the Shanghai benchmark would trade this year in a range 500 points higher or lower than 3,300.

From China's perspective, producers of consumer electronics, apparel and household appliances could be among the biggest victims should trade disputes heat up, thanks to their big revenue exposure to American customers, according to Reto Hess, head of global equity research at Credit Suisse.

Companies including wireless technology firm GoerTek Inc. and apparel maker Regina Miracle International Holdings earn more than 70 percent of their revenue from the U.S., the most among stocks in the MSCI China and Hong Kong indexes, according to Morgan Stanley.

Semiconductor makers Ambarella and Texas Instruments lead American firms in the MSCI U.S. index earning most of their sales from China, Morgan Stanley's Garner said.

If Chinese consumers did boycott U.S. brands — as they did to the Japanese in 2012 over a territorial dispute — domestic producers such as carmaker BYD Co. and sportswear maker Anta Sports Products Ltd. would benefit, Credit Suisse's Hess said.

Foreign, non-American brands could also win market share as a more attractive third alternative. "Chinese consumers might decide to buy a German instead of a U.S. car, or buy an Adidas shirt instead of a Nike shirt," Hess said.

Nike in Beijing — Photo: d-n-c

Overall, U.S. equities have more to lose than their Chinese counterparts in a trade war, at least in the view of Morgan Stanley's Garner. While almost 10% of companies in the MSCI U.S. index derive at least a tenth of their sales from China, less than 2 percent of firms in China can say the same about the U.S., according to Morgan Stanley.

In a "grand bargain" in which the two sides hug instead of butt heads, Garner sees the biggest beneficiaries being Chinese energy, entertainment, technology and tourism companies, along with U.S. telecommunications and semiconductor businesses.

A positive scenario is hard to envisage for those focused on Trump's warnings on the campaign trail.

"It's very difficult to see the Trump administration not doing anything," said David Cui, a Bank of America Corp. strategist based in Singapore who has been a long-term bear on the China market. "If tensions start to build up, most likely the related stocks will get sold off."

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Green

In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.


It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park

Xinhua/ZUMA

Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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