A full-blown trade war between the U.S. and China would hurt corporate credit, although such a conflict remains avoidable, S&P Global Ratings said in a new report as it warned that certain American sectors and companies could be affected by the countries' latest trade actions.
Fears of a U.S.-China trade war intensified after Beijing said it would retaliate against President Donald Trump's order to impose tariffs on up to $60 billion of Chinese imports.
"A trade war between the world's two largest economies would hurt global confidence, economic growth, and credit," S&P said. The rating agency also previously warned that global retaliation to tariffs on steel and aluminum imports may drag down U.S. economic output.
S&P said the trade tensions would have muted near-term effects on corporate credit, but some sectors would nonetheless feel an impact, including aerospace and defense and transportation.
In the aerospace and defense sector, Boeing Co. could lose long-term business to major rival Airbus if China punishes the U.S. plane maker, according to S&P's preliminary views.
"As aircraft purchase decisions are made by the Chinese government and not individual airlines, the risk is that Airbus would gain a higher proportion of future orders," S&P said, although it added that Airbus may not get all future orders from China.
In the transportation sector, U.S. companies with operations in China are vulnerable to trade war fallout, including FedEx Corp. and UPS Inc.
"Although we do not predict drastic measures against the package express companies (which to some extent facilitate Chinese exports), Chinese authorities could pressure them to cede more control or business to domestic partners or competitors over time. Another risk is that authorities hamper their plans to expand in China," S&P said.
Some U.S. airlines will also take a "noticeable but not large hit" to their earnings if Chinese carriers obtain a bigger share of air travel between the U.S. and China due to trade tensions, S&P added.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.