China Targets FedEx in ‘Warning’ to U.S.

(Bloomberg) -
(Coolcaesar )

China targeted FedEx in its escalating trade war with the U.S., giving a hint of the kind of foreign companies it may blacklist as “unreliable.”

As details of China’s criteria trickled out, the investigation into FedEx’s “wrongful delivery of packages” was framed by the state news agency as a warning by Beijing after the Trump administration imposed a ban on business with telecom giant Huawei.

A Chinese official said on Sunday that the government is firmly against the American “long-arm” jurisdiction on Huawei, while downplaying concerns that the planned list of unreliable entities will be used to target foreign companies as a retaliation tool in the trade war.

To designate an untrustworthy foreign entity, China will look at whether it discriminates against domestic companies, the state-run Xinhua news agency said Saturday. Other considerations will be violations of market rules, breach of contract, harm caused to Chinese firms and actual or potential threats to national security, it reported.

The latest salvo signals that there’s no detente in sight in the struggle between the world’s two biggest economies at a time when trade talks have broken down. Chinese retaliatory tariffs on U.S. products kicked in Saturday, affecting more than 2,400 goods that face levies of as much as 25% compared with 10% previously.

On Sunday, China blamed the U.S. for the collapse of trade talks and said it won’t buckle under maximum pressure to make concessions. The trade war hasn’t “made America great again,” and while China doesn’t want conflict, it won’t shy away from one, according to a white paper on its negotiations with the U.S.

China had said Friday that it will draw up a list of “unreliable entities” that harm the interests of Chinese companies. That opens the door to targeting a broad swath of the global tech industry, from U.S. giants like Google, Qualcomm and Intel to non-American suppliers that have cut off Huawei, such as Toshiba and Arm.

FedEx has apologized for delivery errors on Huawei packages after reports that parcels were returned to senders, and China’s biggest tech company said it’s reviewing its relationship with the U.S. delivery service. Two packages containing documents being shipped to the company in China from Japan were diverted to the U.S. without authorization, Reuters reported.

China opened a probe because FedEx violated Chinese laws and regulations and harmed customers by misdirecting packages, Xinhua said. Vice Minister of Commerce Wang Shouwen said Sunday that “there’s no grounds to blame China” for starting the investigation into FedEx.

“The investigation into FedEx helps to safeguard market order of express delivery in China and helps to protect the lawful rights of Chinese companies and users,” Ma Junsheng, head of the State Postal Bureau of China, told CCTV News on Sunday. “It also helps to ensure the security of postal communication and the economy.”

China Central Television said in a commentary that China had established a list of unreliable entities and that the investigation into FedEx will be a warning to other foreign companies and individuals “that violate Chinese laws and regulations.” Xinhua used two hashtags in Weibo posts on the FedEx probe: #ChinaUSTrade and #RetaliateAgainstUSTradeBullying.

FedEx said it values its business in China and its relationship with Chinese clients, including Huawei. “FedEx will fully cooperate with any regulatory investigation into how we serve our customers,” the company said in a statement Saturday.

Trade tensions are growing wider, raising concern about the impact on the global economy. Bloomberg reported on Friday that China has a plan to restrict exports of rare earths to the U.S. if it needs to. On another front, President Donald Trump said he plans to impose a 5% U.S. tariff on all Mexican goods because of illegal immigration.

With markets roiled by the threats and rhetoric on trade, the S&P 500 had its worst month of May in seven years. Investors are now looking to a meeting between Mr. Trump and Chinese President Xi Jinping at the end of the month at the Group of 20 Summit in Osaka, Japan, for a possible rapprochement and easing of trade tensions.

Mr. Trump may ask Treasury Secretary Steven Mnuchin to meet with Chinese officials while in Japan next week amid the escalating trade dispute, White House senior adviser Kellyanne Conway said.