When it comes to trade, you can win the battle—but lose the war, as American companies are finding out.
Zhang Ping, China’s Consul General in Los Angeles, wrote in a statement to Fortune that President Xi Jinping and President Trump agreed to meet on sidelines of the G20 Osaka Summit and both economic teams would maintain communication on the trade issues. But even if there’s a deal, everything may not go back to normal right away. A new survey of Chinese consumers shows a majority boycotting U.S. goods and having an increasingly negative view of American companies.
“The Chinese market is huge—it’s a large market that U.S. companies want to have access to,” said Nicole Lamb-Hale, managing director of Kroll Associates and former assistant commerce secretary in international trade during the Obama administration.
In their 2018 fiscal years, for example, 43.5% of General Motors sales were in China and 20.6% of Apple’s sales were from the country. As of Sept. 30, 2018, 23% of all company-owned and operated Starbucks locations were in China, with China and Asia Pacific representing 18.1% of net revenues.
Until now, Chinese consumers have been “pretty favorable toward U.S. brands,” Lamb-Hale said. That may be subsiding.
While 77% “often buy American goods,” more than half, 56%, “avoided buying an American product to show their support for China,” according to the survey data from advisory firm Brunswick Group. The survey polled 1,000 consumers, which may seem like a small number compared to the 1.4 billion population but it’s large enough for a mathematically valid poll.
In addition, 68% of Chinese consumers said their “opinion of American companies has gotten worse” as a result of the dispute.
Some experts said such studies should be carefully considered. “Polls from inside China must be taken with a substantial amount of salt,” said Lionel Jensen, associate professor of East Asian languages and cultures at the University of Notre Dame.
“The Chinese government was previously actively promoting in a jingoistic temper the protection of the Great Wall of the ‘Motherland’ and urging the population to take up a ‘Long March’ in defense of China’s war against US goods,” Jensen said. That campaign ultimately amounted to little.
The survey’s figures may not be representative. However, Linda Lim, professor emerita of corporate strategy and international business at the University of Michigan and a long-time China watcher, thinks the results “look pretty reliable.”
“Chinese people’s own view has evolved in a much more nationalistic direction than before,” Lim said. “This is even stronger now because of all the rhetoric that has come from the U.S.” As she notes, there’s a lot of rhetoric coming from the U.S. in which people say, “China’s a strategic competitor so we can’t allow them to get ahead of us.” The tone fuels the nationalism and provides justification for more extreme Chinese consumer reactions, like boycotts.
That doesn’t mean China’s market will immediately disappear for American corporations, Notre Dame’s Jensen said. “Chinese tastes for U.S. goods such as Starbucks are well established even as Luckin, its China competitor, is expanding its presence,” he said, adding that “fear of loss of market share by U.S. companies substantially embedded in China would be misplaced.”
William Hurst, an associate professor of political science at Northwestern University, said he thinks demand will recover once tensions are resolved. He sees a bigger issue with “manufacturing and services that are moving to third countries to get around tariffs and trade restrictions China and the U.S. are placing on each other.”
But the potential economic danger to U.S. companies goes beyond the trade war and consumer resentment. Chinese manufacturers are offering better quality good for a lower price than many American brands, and those products will become the first choice for customers, Lim said.
“You discover the Chinese substitute for Starbucks is not bad,” Lim said. “Once people switch, it’s very hard to get them to switch back for a lot of psychological reasons.”
Lamb-Hale agrees. “The longer that this goes on—and I’m hopeful there’s some progress at the G20 around keeping the negotiations going—the riskier it is that even when things loosen up, people will have moved on,” she said.
The result could be a Huawei phone in every pocket, a Dongfeng Motors car in every garage, and a Luckin Coffee on every corner.
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