When President Trump began confronting China on trade practices, there was always a likely totalitarian Chinese response. The inevitable response when confronting the duplicitous dragon is always an attack; it’s the only way Beijing knows how to respond.

Last week Beijing threatened to take action against any corporation who would be perceived as working against the interests of the state. This week communist Beijing begins doing exactly that:

(SCMP) China’s antitrust regulator slapped a US$23.6 million fine on Ford Motor Company’s Chinese venture for restricting sales prices in its hometown, taking the second such action against US carmakers in three years as trade tensions deteriorated between the world’s two largest economies.

Changan Ford Automobile, the 50:50 venture between Michigan-based Ford and Chongqing Changan Automobile, must pay a penalty of 162.8 million yuan (US$23.6 million) – equivalent to 4 per cent of the venture’s annual sales in Chongqing – for a business practice that restricted retail prices since 2013, according to a statement by the State Administration for Market Regulation. The antitrust fine on Changan Ford is the latest salvo by China after the commerce ministry’s Friday announcement that it was compiling a list of “unreliable” foreign companies and individuals deemed to be hurting Chinese interests. (read more)

The Red Dragon is doing what the Red Dragon does. Thus we enter the phase when corporate interests, particularly multinationals, recognize at its core China is a communist state-run, controlled-market, system. All western businesses engaged with China are now at risk of retribution from the communist state.

China is counting on the prior western investment being so significant that a corporation will be reluctant to withdraw. However, in this outlook Beijing seriously underestimates the free market because communist controlled China doesn’t understand the action of a inherently free market.

The first loss is the best loss. If walking away from an investment provides more financial security and stability than attempting to retain a grip on a tenuous position – corporations will walk away.

The reaction from China is immensely predictable; and creates a downward spiral. If any corporation is perceived as working against the interests of the state; the state will take control of the corporate interest. What western business interest would want to do business within China when that reality is the landscape of every economic decision?

Meanwhile President Trump, Secretary Wilbur Ross and USTR Bob Lighthizer are not backing down from the confrontation. GM and Volvo, both with major financial investments in China, had requested relief from U.S. tariffs. Here is where the sharp side of Ross and Lighthizer comes into play:

WASHINGTON/STOCKHOLM (Reuters) – The United States has rejected separate requests from General Motors Co and Chinese-owned Volvo Cars for an exemption to a 25% U.S. tariff on their Chinese-made sport utility vehicle models. GM, the largest U.S. automaker, and Sweden’s Volvo both said they were aware of the respective denials of their nearly year-old petitions. Both companies had not raised the sticker price to account for tariffs, which came into play last July. The denial of GM’s petition for its Buick Envision came in a May 29 letter from the U.S. Trade Representative’s office saying the request concerned “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” (read more)

Trump, Lighthizer and Ross are sending a very deliberate message. If you crawled into bed with the Dragon, don’t look for us to help make your bed more comfy… deal with it.

As Wall Street and the multinational corporate community see that Trump is not going to assist anyone, even an American company who made a previously bad decision to invest in China, that awareness becomes a part of the corporate risk management equation. Again, more pressure to exit the risk matrix that is now Beijing.

Meanwhile President Trump strategically engages with Tiawan and offers $2 billion in weapons to the arch nemesis of Beijing.

WASHINGTON (Reuters) – The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, in a move likely to anger China as a trade war between the world’s two biggest economies escalates. (read more)

Now, many pundits -vested in selling Wall Street positions- immediately begin to stoke fears about this economic confrontation leading to a military war with China, but that is nonsense.

The only way China would be able to deploy it’s military, as a cloaked weapon to assist the economic war, would be if hostile U.S. military action toward an actual Chinese geographic interest was part of the equation. That dynamic doesn’t exist. [Note: this potential need was always the reason for China retaining manipulative control of North Korea as a proxy province.]

So long as President Trump continues hitting China on purely economic issues; and there’s every reason to believe he will; Panda can only hit back using economic tools it controls. The U.S. has far more economic leverage than China in this dynamic. [Note the brilliant Trump foresight of U.S. and Japan relations.]

Thus President Trump only has to position U.S. policy to benefit non-engagement with China (see Huawei); and China will respond by destroying any affiliated business they view as participating in, or supporting, the adverse policy [see Fed-Ex]. Beijing cannot help itself. The dragon will act as a dragon will act.

President Trump has positioned this geopolitical trade reset perfectly. Trump is applying Chairman Xi’s own “us -vs- them approach” toward confronting China. The supply chain investment Beijing needs to sustain itself is now being controlled by elements outside China. Beijing responds by attacking those in the international community who control the investment.

This will not end well for China.

Watch as time goes along and more companies, and nations, slowly walk toward the exits with China. There is just too much inherent financial risk.