‘Actions speak louder’: China-U.S. backlash more worrying than word war

US China
U.S. Secretary of State Antony Blinken (2nd R), joined by National Security Advisor Jake Sullivan (R), speaks while facing Yang Jiechi (2nd L), director of the Central Foreign Affairs Commission Office, and Wang Yi (L), China’s State Councilor and Foreign Minister, at the opening session of U.S.-China talks at the Captain Cook Hotel in Anchorage, Alaska, U.S. March 18, 2021. Frederic J. Brown/Pool via REUTERS – RC2YDM9TZPPS

Chinese moves against U.S. companies say more than the grandstanding that happened at a meeting on Thursday. The first high-level assembly between the two countries was marked by public barbs that played to domestic audiences. But now Beijing is restricting the use of Tesla vehicles due to national security concerns, according to the Wall Street Journal. That payback is more painful for American firms.

The discussion topics laid out earlier this week foreshadowed a testy meeting. U.S. officials said they would focus on areas where there was little hope for compromise, such as Chinese treatment of Muslim minorities in Xinjiang province. U.S. Secretary of State Antony Blinken accused Beijing of being a negative disruptive force while his counterpart, China’s top diplomat Yang Jiechi, blamed the United States for its poor treatment of minorities.

That scores them both points at home. But the actual changes have bigger consequences for American firms. Claiming national security concerns, the Chinese government is imposing restrictions on the use of Tesla vehicles by the military and state-owned enterprises in sensitive industries. The worry is that data recorded by the cars could be sent to the United States.

This mimics accusations the U.S. government made against Chinese telecommunications firm Huawei, TikTok, and others. For Huawei, those restrictions have grown from limiting use in the United States to preventing American companies from selling to it.

Still, China’s backlash is more impactful. It has become an important market for Tesla. Sales in the country accounted for more than 20% of the electric-car maker’s total 2020 revenue of $31.5 billion. Its Shanghai factory now produces over 5,000 Model 3 vehicles per week while it started manufacturing the Model Y last December. The People’s Republic is also a big source of revenue for other American companies, like Apple, which had about 20% of its net sales in the Dec. 31 quarter come from the region.

Conversely, most Chinese companies have a small presence in the United States. And U.S. consumers and firms are more accustomed to having control over their consumption and purchase decisions. Overarching bans, like the one the Donald Trump Administration attempted on TikTok, also sometimes have to work their way through the U.S. court systems, making government crackdowns harder. Beijing is showing they can put the squeeze on American firms. U.S. officials may find they don’t have as much ammunition to add to their war of words.

unnamed file