In the aftermath of US arms sales to Taiwan, China has reacted by declaring that it will sanction US firms involved with the transfer of arms to Taiwan. It is flipping the script by doing to US firms what the US does to other countries’ companies. But will the Chinese effort achieve any success or is it merely a bunch of gum-flapping that is intended to help Chinese politicians save face?
The major companies that would be impacted by the sanctions would be General Dynamics, Oshkosh, and Raytheon, the primary contractors for the weapons being sold to Taiwan. None of them have huge exposure to the Chinese market, so it’s unclear how much of an effect any sanctions would have on them. But China could decide to try to figure out any subcontractors involved in creating those weapons systems and sanction them too. That could hurt if any of them have any exposure to China.
Because of existing federal laws and regulations, most US defense contractors aren’t doing business with China to begin with, so the new sanctions are a bit of a paper tiger. But they’re also an indicator that China is sick and tired of being a doormat, and that they are willing to escalate the war of words in order to save face.
The major risk, of course, comes if China decides that a war of words isn’t enough, and decides to escalate to military action. Senior Chinese military officers have made that threat before, and they can’t be considered idle threats. Any future sales of military equipment to China risk incurring something more than just a war of words or more sanctions.
The risk of war with China is probably higher now than it ever has been, heightened by the tension brought about by the trade war. It’s going to be incredibly difficult to walk anything back now, so both sides need to maintain their calm so as to ensure that the war of words doesn’t escalate into a hot war.
