A state-run newspaper has warned that China may target the share prices of American multinational companies dependent on Chinese demand if US President Donald Trump continues to escalate trade tensions between the two countries.

The Global Times said China does not want a trade war with the United States, but “will have no choice but to fight back in a bid to safeguard the interests of Chinese investors” from market losses.

“If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants. China is in full combat mode and prepared to strongly respond to any probable threat or economic assault from Trump,” it said in a commentary. 

Chinese stocks this week recorded their worst performance since early February, with the Shanghai Stock Exchange down 4.4% and the CSI300 — comprising the top 300 listings on the Shanghai and Shenzhen markets — falling by 3.8%. Investors blamed trade tensions.

In New York, the Dow Jones Industrial Average registered an eighth straight day of losses on Thursday and the Nasdaq Composite had its weakest session since April. American traders are worried about deteriorating US relations with both China and the European Union.

Noting that industry giants like Boeing, Caterpillar and Apple had lost value this week, the Global Times said a trade war “is actually a double-edged sword. If Chinese companies suffer, Dow Jones giants may soon find themselves in the crosshairs of the trade battle.”

The newspaper did not spell out what measures might be taken by Beijing, but hinted they would target companies with a big reliance on China. More than 20% of Apple’s iPhone sales are generated in China, while the nation provides 80% of products sold by retailer Walmart.

Many analysts believe China would be biting off too much if it singled out American companies for retaliation

Any economic sanctions could also affect American companies with investments in China. One example is entertainment conglomerate Walt Disney, whose theme park in Shanghai attracted more than 10 million visitors in its first year of operation.

While higher tariffs imposed by Trump are China’s main beef, it is also upset that Chinese telecom manufacturer ZTE was fined US$1 billion earlier this month for illegally shipping goods to Iran and North Korea. ZTE also needs to pay US$400 million in escrow in the event of future violations.

Many analysts believe China would be biting off too much if it singled out American companies for retaliation: their sales would take a small hit, but the Chinese economy would suffer much more. It might also create huge profits for smugglers if market supplies were disrupted.

For example, if China limits the import of iPhone, smugglers will go back to carrying the phones from Hong Kong to Shenzhen. In 2013, a Hong Kong man was arrested for smuggling 66 iPhones to Shenzhen after being lured by the promise of big mark-ups. Another man was caught with 99 iPhones hidden on his body in 2015.

If Shanghai authorities discourage people from visiting Disneyland, the first losers will be local staff and nearby shops. The municipal government will come off even worse, because it owns 57% of Shanghai Disneyland; Walt Disney has the remaining 43% stake.

China would also suffer from any sharp fall in US stock markets, as this would inevitably have a domino effect on Asian exchanges, including those in China. So Chinese stocks would slide even lower.

What else can Beijing do to get back at Trump? Ban Hollywood movies from being screened in China, or maybe kick US casinos out of Macau? For all of its rhetoric, China has few weapons at its disposal.