Trump Set To Retaliate To China's "Unfair Trade Practices"

Tyler Durden's picture

President Trump has given China six months to prove that it is committed to preventing a nuclear-armed North Korea, and it seems his tolerance for China’s dithering has finally reached its limit. Now that President Xi Jinping has established that his government is unwilling to engage in a meaningful crackdown on its neighbor, the era of using carrots like improving trade relations to coax China into helping solve the “North Korea problem” has ended. It is now time for the stick.

According to reports in the New York Times, Wall Street Journal and Associated Press, the Trump administration is planning to use an obscure 1970s law to launch a "broad-based" investigation into whether China’s trade-related intellectual property policies constitute “unfair trade practices.

The US inquiry could become an obstacle for one of the Communist Party’s top economic priorities: the Made in China 2025 initiative, while calls for China to become a “global leader” in ten industries with the help of huge infusions of state money.

In the coming days, the US trade rep will launch a “Section 301” investigation, named after a portion of the 1974 Trade Act. Here’s a breakdown of the likely timeline for the investigation, as well as possible outcomes, courtesy of the NYT:

“Under the process that the Trump administration plans to set in motion, the Office of the United States Trade Representative will start an investigation into China’s trade practices. Following the investigation, which could be completed in as little as a few months, the United States could impose steep tariffs on Chinese imports, rescind licenses for Chinese companies to do business in the United States, or take other measures. The process is known as a Section 301 investigation, after the relevant portions of the 1974 Trade Act.”

Another option being considered by the Trump administration would involve invoking the International Emergency Economic Powers Act, another 1970s law that gives the president broad powers to regulate commerce after declaring a “national emergency,” according to WSJ.

A Section 301 investigation could “pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures.”

This latest – and, to date, most aggressive - change of heart follows an unsuccessful meeting on July 21 between US and Chinese trade officials where the two sides failed to agree to anything beyond an Obama-era trade deal. Bilateral trade talks had earlier shown some progress when the two sides agreed to an expansion of the Obama trade deal back in May.

It’s also the latest vacillation in the administration’s China stance since Trump initially decided to soften his China-bashing campaign rhetoric following a meeting with President Xi at Mar-a-Lago back in April.

In the past, Trump has hammered China for its massive trade surplus and widespread government intervention in its corporate sector. But by instead focusing the investigation on intellectual property, the administration is going to bat for business groups that have long griped about China’s penchant for stealing trade secrets, according to WSJ.

“American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China. Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year.

 

That discontent has intensified as China’s economy continued to expand and its computer and software sectors became bigger competitors internationally. Western firms fear China will use the regulations to bar foreign investments in areas that Beijing targets for investment, including semiconductors, advanced-machine tools and artificial intelligence.”

Many questions remain, but one of the biggest is the role that the WTO will play in resolving a trade dispute between the world’s two largest economies. Trump administration officials have in the past favored a unilateral approach that circumvents the WTO, according to WSJ.

“One big question hanging over the White House review is whether the administration pursues any complaint through the World Trade Organization, or whether it chooses to impose penalties on its own without first seeking permission from the international body, which some Trump advisers have argued is incapable of dealing with China’s trade practices. Trump aides have regularly vowed to pursue a more unilateral approach to trade but have so far done little along those lines.”

Just invoking Section 301 would be an implicit snub to the WTO, which was created to prevent unilateral actions in trade disputes, WSJ continues.

“Widely used in the 1970s and 1980s, Section 301 cases have largely disappeared since the 1995 creation of the WTO, which has its own dispute-settlement process. A main goal of the Geneva-based institution was to curb such unilateral trade actions and to have them handled by a more neutral international arbiter. U.S. administrations over the past two decades have decided to steer nearly all trade complaints through the WTO and have rarely touched Section 301.”

Notably, the last Section 301 case was brought by a union, and was largely ineffective, as the NYT notes.

“The last Section 301 case was in 2010 and was initiated by a labor union, the United Steel Workers, instead of by the government, as the Trump administration is preparing to do. The case focused on Chinese business practices in the solar panel and wind turbine industries, and the Chinese government later promised to limit some of these practices.

 

But China’s solar and wind turbine industries have gone on to dominate their global industries, after receiving multibillion-dollar loans from China’s state-controlled banking system despite major defaults on earlier loans.”

Trade Representative Robert Lighthizer worked on many Section 301 investigations during his stint as a deputy trade rep in the Reagan administration. As the NYT notes, the US “energetically” invoked Section 301 to resolve trade disputes during the 1980s (notably before the birth of the WTO).

Of course, other WTO members could be reluctant to chastise the US for confronting China over its intellectual-property policies, which in many cases are tantamount to extortion, as China demands companies essentially hand over their trade secrets in exchange for access to the Chinese market. According to the AP, “foreign companies have long complained over rampant piracy and technology theft by Chinese companies.” It’s a testament to the Communist Party’s power that China has been allowed to steal technology from other companies and countries with impunity.

A confrontation is overdue.
 

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Cognitive Dissonance's picture

This should get interesting.

Oh look, a rabbit.

Looney's picture

 

to coax China into helping solve the “North Korea problem”…

 According to RT, Tillerson told reporters in Washington DC, “We do not seek a regime change in North Korea; we do not seek the collapse of the regime; we do not seek an accelerated reunification of the peninsula; we do not seek an excuse to send our military north of the 38th parallel.”

Tillerson seems to be a good pragmatic man.

Unfortunately, he looks like a lonely sane person wearing a Straightjacket and locked in the Padded Room. Meanwhile, the NeoLunatics have no intention of relinquishing their control of the Asylum.

Syria. When Tillerson said that “Assad’s gotta go” is no longer a requirement, Nikky Haley and McCain went apeshit demanding that “Assad HAS GOT to go”. Within days, their Saudi bosses pulled the fake chemical attack in Syria. I betcha, when Trump ordered the missile strike on Syria, he didn’t even consult with Rex – Ivanka’s tears were the deciding factor.

NATO. When Tillerson wanted to ratchet up the pressure on NATO by skipping their summit, Stoltenberg ran to Trump bitching and kvetching. Two hours later, Trump flip-flopped on NATO – “It is no longer obsolete” and ordered Rex to attend the summit.

35 Russian Diplomats. That non-issue should’ve been resolved on January 21st. Tillerson has been overruled by everyone in DC, including janitors and homeless people.

North Korea. Instead of threatening China with sanction, Tillerson floated the idea of the THAAD Carrot – “we don’t deploy it and keep it mothballed in South Korea, in exchange for China’s REAL cooperation on North Korea’s nuclear testing”. That idea was shut down immediately and Mr. Xi was offered a slice of Chocolate Cake instead.

Tillerson IS a good man, but he will soon be pushed out, just to be replaced by another general or a banker. Oh, well…  ;-)

Looney

FrozenGoodz's picture

A tweet in all caps should show em

At least the WH is not in chaos

Life of Illusion's picture

broad powers to regulate commerce after declaring a “national emergency,” 

 

WILBUR ROSS WILL LOVE THESE POWERS

BaBaBouy's picture

Isn't It Clear, Thump Wants Woar...

Butt, me shake your hand very very long time...

Xena fobe's picture

All the shuffling of staff finally resulted in some aound policy..

Luc X. Ifer's picture

Ok, is it now clear why top man at the WH are strong military leaders and they have an arrangement which ensures continuation?!

 

peterk's picture

Chinas UNFAIR TRADE PRACTICES amount to selling  the goods that the US wants at CHEAPER prices than US manufacturers.

And also  giving the YANKs  money to actually purchase those said products.

 

Blankone's picture

Trump, the reality show host/actor, is just expanding a long standing routine used on small countries that were non Euro countries. They make false claims of oppression, violations of international law or morals, threat to the US, hatred of the US and some sort of attack (computer hacking) against the US or a Euro country and how they are part of some axis against democracy and the US.

Trump is spewing that game to all areas and is upsetting some by using it against larger countries and to some extent against the EU. As he attacks them he cries foul as the victim. Trump really wants to be a jew. (He persuaded all of his married offspring to marry jews.)

CJgipper's picture

You're clueless.  They print Yuan to subsidize Chinese manufacturing.  Then they sell those goods here and undercut US prices.  

 

We need MASSIVE tarrifs on China with reductions linked to things like

SOME kind of enforced environmental regulations, at least minimally effective regulation.  Look into the destruction they're engaged in.  It's big enough that it WILL affect us.

 

SOME kind of OSHA rules.

 

SOME kind of minimum wage.  If you can't pay someone to live, then it isn't a job worth doing, at least in teh mfg space and all.

I need Another Beer's picture

Completely unrelated to the above article but interesting. I call it Highway Robbery.

LOWNDES CO., GA 

Georgia State Patrol troopers made a major bust during an I-75 traffic stop.

The trooper pulled a vehicle over for failure to move over while Lowndes County Captain Ed Christian performed a traffic stop on I-75 Sunday evening just after 5 p.m.

Captain Stryde Jones said Christian's K-9 was tipped off to something inside the car that was pulled over for failure to move over. 

After searching the vehicle, GSP found 33 bundles of U.S. currency totaling just over $36,000 in a speaker located in the trunk. 

Jones said GSP confiscated the money and will be conducting an investigation. 

No arrests were made.

rejected's picture

With asset forfeiture coppers can smell money a mile away. The car driver claimed they knew nothing about it but obviously the coppers were tipped off somehow. Coppers today steal more per year than legacy thieves.

And yet Americans continue to bark how free they are especially compared to Russia or China.

Here's a Russian article on a bag containing $33,000 in Rubles at an airport. Read the article then ask your self, what would have happened if that were in the land of the Free.

http://www.pravdareport.com/news/society/stories/25-07-2017/138247-bag_c...

hoist the bs flag's picture

keep calm and HAIL TRUMP ZH!

gunzeon's picture

one could look at this as merely a revenue grab, ie: tariffs

otherwise there'd be an effort to begin onshoring all the exported jobs.

of course, the addicted consumer will have no choice except to stump up the extra doh from the imported crap, and, i'm no expert, but that causes inflation right ?

Justin Case's picture

The hundreds of US companies manufacturing goods in China for merican consumption, will suffer a drop in earnings this year. Lets see how Mr. Market likes the strategy.

It is unlikely that the Chinese think that a handful of White People are exceptional in anything except their diminutive numbers. The populations of Asia, Africa, and South America dwarf those that comprise Washington’s Empire.

Xena fobe's picture

Those companies can manufacture elsewhere.  They see their manufacturing costs rising and access to Chinese markets becoming more challenging.

They control US policy and if the US government is taking this approach, it means corporations demand it.  I believe this article mentions it too. 

 

 

 

 

Justin Case's picture

"Those companies can manufacture elsewhere."

Sure they can. Question is where and at what cost. Until they figure that out, they will lose profits. Maybe you have the answer, the corporations don't.

CJgipper's picture

GOOD.  They SHOULD be losing profits for offshoring everything.  We SHOULD be takign care of Americans first (and protecting foreign/chinese workers in the process).

Justin Case's picture

Money talks, bullshit walks. You love capitalism until it's excercised to it's fullest. You live in a corporatocracy and yoar corporations buy the election. GS supports both candidates, that way they never lose.

Vageling's picture

Let me try an different angle. How about these greedy fuckers want it all and can't have it, they go there for cheap labor on one side and they want the protection they have at home on the other. Choices, choices... Not that I'm trying to downplay what China is doing. Corps think they already own the world. But they went for the big profit. And that comes with a price in China. 

Besides, pressure worked so well before. Try diplomacy for a change. 

Déjà view's picture

On August 15, 1971, President Richard Nixon closed the gold window and imposed a 10 percent surcharge on all dutiable imports in an effort to force other countries to revalue their currencies against the dollar. The import surcharge was lifted four months later after the Smithsonian agreement led to new exchange rate parities.

http://www.nber.org/papers/w17749

Pressure: 4 months
Diplomacy: Timeless

Xena fobe's picture

Agree except for your last sentence.  Diplomacy will work for all nations except China. 

RagaMuffin's picture

If DT keeps it simple Fair Trade = Equal trade(equal access to equal treatment) he will get a hell of a lot of support from Dems and Reupubs. All without firing a shot...............

ludwigvmises's picture

Trump won't do anything except for TALK about a trade war. And the Chinese aren't swayed by talk. Nothing will happen.

lester1's picture

39% WITH a +12% Democrat polling sample.

 

So...

rejected's picture

That's good compared to Con-gress'   9%. Dumbshit Americans vote them in until they die

ElTerco's picture

He'll also play a lot of golf. That's got to be worth something.

Stan522's picture

This won't end well.....

historian40's picture

Is Trump's clothing still being made in China?

Arnold's picture

There is no doubt that the new cadre has already been selected.

Maybe we could send some of those unemployed O'Bama boys over to influence the selections.

https://www.usnews.com/news/world/articles/2017-03-08/china-looks-ahead-...

https://en.wikipedia.org/wiki/19th_National_Congress_of_the_Communist_Pa...

lester1's picture

China will collapse without access to US markets. We can survive without buying cheap Chinese goods.

 

President Trump holds all the cards here!

historian40's picture

If the Chinese manage to grow their domestic market to replace the US market, they will no longer need us to buy from them.  They have the population.

lester1's picture

Nope. Youre forgetting China is still a communist dictatorship. They are NOT free.

* If those Chinese factory workers suddenly become unemployed, they won't just sit around. They will riot and toss out the communist regime.  

Tienenmen 2.0. That's what would happen if we cut them off to US markets.

gunzeon's picture

about 10 or so years ago, several million just headed back to their rice paddies after losing their jobs. No way would they dream of going Bolshie

rejected's picture

They are NOT free. 

Like we are?  

LMAO,,, Thanks for my morning blue pill dose.

lucitanian's picture

Not that much difference. China is ruled by a single party while the US has "nominally" two and thereby calls itself a democracy.

The big difference is that China can actually plan ahead (i.e. more than 5 years) and build global projects without having to go to war with half the world. (while the political structure of US spends its efforts raising billions for political contributions through crony corruption with mega-corporations, who at the end of the day depend on the Fed or the Pentagon)

peterk's picture

you must deluded.

The notion china NEEDS the US to consume their output is a hollywood fantasy.

China ending up in riots if the US doesnt buy their crap is stupid.

let me guess... your a yank huh....

Justin Case's picture

It's difficult to find very many reasons to label China as communist these days. The ruling party in China still calls itself communist. The international media still likes to refer to China as communist. But where is communism still manifested in China today? Where are the basic Communist values of sharing and equality evident in Chinese society now? They cannot be found. Quite simply, China is no longer a communist country.

If we are looking for evidence of communism in China, the first and most important place to look is at the economy. The economy in China is now decidedly capitalistic in nature. Average Chinese citizens can start their own businesses and put their income into private bank accounts. Chinese citizens can buy stocks in companies and enjoy the revenues or suffer the losses. As of just a few years ago, private property rights have been greatly enhanced in China, and Chinese people can now be more secure that their land will not be taken away from them. Let us not forget about the heavy international investment that has been permitted in China which has played a major role in fueling this developing and booming economy. As a result, there are very rich people and very poor people in China as well as an emerging middle class. Chinese citizens, who always carried a good sense for business but were restricted from entrepreneurship in the past have now been more free to take risks and build successful companies. Thus capitalism has transformed the Chinese economy and changed people’s lives forever.

Some people just can't understand that China now employs capitalist and socialist economic policies! Its ridiculous! How can people be so stupid! China has been reforming from communism for 30+ years now. So many people never change their mind, but never over something so stupid! its not like this is up for debate, 10 minitues on google will show anyone that China is no longer 100% communist.

China is, indeed, going through a transition, but it is not a transition from capitalism to communism. The evidence supports a conclusion that feudal appropriation has prevailed in both agriculture (during the commune-era) and industry (during the SRE-era) in the recent past and is now being displaced by capitalism in industry and increasingly in agriculture. In other words, China is going through a transition from feudalism to capitalism. I just don’t see calling such a transition socialism.

Capitalism will be much more robust if it’s not a monopoly of the West, but flourishes in societies with different cultures, religions, histories, and political systems.

It's time to update yoar fictional mindset and resist fake news narratives of demonizing labels of countries the administrations cannot conquer.

 

Luc X. Ifer's picture

China exactly like USSR, USA, India and Russia are fascist oligarchies, they started from different political spectrum areas but ended the same. It just shows that democracy and politics as today's are not functional per democratic intent. AI programmed based on the principles of humanism and leading trough e-politics is the only solution to this mess.

 

HoyeruNew's picture

yes and USA is the beacon of freedom and democracy where free press works and everyone is well educated and prosperous.

Dont you ever run out of BS?

ReturnOfDaMac's picture

I think Les forgot the /sarc tag   he, he, he ...

Nexus789's picture

They are making rapid inroads into all the Asian economies and the growing middle class there. Aso into Europe..US could become marginalised. 

YHWH is greater's picture

Buy made in America, the job you 'll save might be yours (from a late 70's bumpersticker).

Another godd sticker claimed :  Cancer cures smoking...  :D

JimmyRainbow's picture

China will collapse without access to US markets.

lol.

sure, all chinese on their knees .... all 1.3 billion