As Washington doubles down on its trade war with China, and tariffs now going as high as 104%, some leading experts believe that the Middle Kingdom might have an ace up its sleeve, that could hit the United States where it hurts most--Services.
A vast majority of U.S. imports from China are tangible goods, whereas its exports to the country largely comprise services, and this includes tech solutions, consulting services, law firms, and even Hollywood movies, among others. China, in fact, runs a $32 billion deficit with the U.S. on services.
What Happened: Two widely followed bloggers in China with connections within the Chinese Communist Party have released a seemingly identical list of measures that the country is planning in retaliation against the tariffs imposed by the Trump Administration, reported Bloomberg.
Among the list of measures shared by Ren Yi, the grandson of a former Guangdong province Communist Party chief, and Liu Hong, a senior journalist at Xinhua, the state-run news agency, includes a plan to “reduce or ban the import of U.S.-made films.”
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Besides this, China plans to target the U.S. services sector in several other ways, such as restricting American companies from taking part in Chinese government procurement processes and limiting the cooperation between Chinese companies and U.S. law firms and consultancies.
Why It Matters: In China’s $17.7 billion box office, Hollywood movies managed to gross a little under $600 million in 2024, while the total U.S. and Canadian box office numbers during the same period stood at $8.6 billion. So, the move is expected to have a sizable impact on the industry.
Stocks like Walt Disney Co. (NYSE:DIS) will be in focus considering its globalized IP, with several multi-million dollar hits over the years. It also has a sizable merchandising and theme park business in China, which will be impacted. Warner Bros Discovery Inc. (NASDAQ:WBD) is next in line, with several international licensing deals in the country that could be cut short.
However, the hardest hit could be IMAX Corp. (NYSE:IMAX), which derives 23% of its revenue from China, where 45% of all IMAX screens are located.
Several other companies provide software, consulting, and related services in the Mainland, such as Salesforce Inc (NYSE:CRM) partnering with Alibaba Group Holding Ltd. (NYSE:BABA) to offer services in the country, however, given the opaqueness of the nation’s financial markets, and the kind of barriers imposed, there isn’t a lot of clarity on the kind of impact a tariff on services would have.
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