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

(Bloomberg) — China targeted FedEx Corp (NYSE:). in its escalating trade war with the U.S., giving a hint of which foreign companies it may blacklist as “unreliable.”

With Chinese officials due to announce their position on trade talks with the U.S. on Sunday, the investigation into FedEx’s “wrongful delivery of packages” was framed as a warning by Beijing after the Trump administration imposed a ban on business with telecom giant Huawei Technologies Co.

The latest salvo signals 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. imports kicked in Saturday in Beijing, affecting more than 2,400 goods that face levies of as much as 25% compared with 10% previously.

FedEx apologized this week for delivery errors on Huawei packages following 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, the state-run Xinhua News Agency said Saturday.

‘A Warning’

“Now that China has established a list of unreliable entities, the investigation into FedEx will be a warning to other foreign companies and individuals that violate Chinese laws and regulations,” China Central Television said in a commentary.

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

Xinhua used two hashtags in Weibo posts on the FedEx probe: #ChinaUSTrade and #RetaliateAgainstUSTradeBullying.

China will publish a white paper on its position on trade talks with the U.S. on Sunday in Beijing. The document will be released at 10 a.m. on Sunday, and Vice Commerce Minister Wang Shouwen will take questions, according to an official statement.

Markets Rattled

Trade tensions are spilling ever 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 over illegal immigration.

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

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

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2019-06-01