White House Pushes Beijing To Roll Back "Made In China 2025" Initiative

Just hours after the White House revealed that it had extended exemptions on aluminum and steel import tariffs from the European Union, Canada, Mexico and several other countries, Nikkei reported Tuesday evening that China has presented the Trump administration with a plan to boost imports of aircraft, semiconductors and natural gas from the US to try and reduce its massive trade surplus.

However, Chinese officials are less enthusiastic about Washington's demands that it scrap its "Made in China 2025" initiative to bolster high-tech manufacturing in several key sectors.

The report comes as Treasury Secretary Steven Mnuchin, top economic advisor Larry Kudlow, Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross and Trump advisor Peter Navarro head to Beijing later this week for the first round of face-to-face talks to try and end the trade war. They will meet with senior Chinese officials including President Xi and Vice Premier Liu He, China's de facto economy czar.

Since shortly after announcing his candidacy for office, President Trump has railed against the US-China trade deficit, declaring that it was tantamount to handing billions of dollars to the Chinese every year.

CHina

The Trump administration's demands regarding "Made in China 2025" could become a potential sticking point, as Chinese officials have expressed reservations about scrapping one of President Xi's signature initiatives. The plan calls for building up 10 key high-tech areas of China's manufacturing sector, including industrial robots and semiconductors.

China has presented the Trump administration with plans to boost aircraft, semiconductor and natural gas imports in response to American demands that the country reduce its trade surplus with the U.S. by $100 billion, according to the sources. Beijing is working to open its automotive and financial sectors further as well.

But trade frictions between the U.S. and China go even deeper. Washington's greatest concern involves "Made in China 2025," a senior White House official said, referring to Xi's plan for building up 10 key areas of China's manufacturing sector. They include industrial robots and semiconductors, an area in which China seeks to challenge the likes of Intel and Samsung.

"China increasingly threatens to dominate the industries of the future: artificial intelligence, autonomous vehicles, blockchain systems, robotics, high-tech ship manufacturing and more," White House trade adviser Peter Navarro wrote in the Wall Street Journal last month. "Death by China" author Navarro, who thinks the country's rise in high-tech manufacturing could lead to a military clash, was an influential voice behind the tariffs in response to alleged Chinese intellectual property abuses.

Navarro will accompany Mnuchin and the others to China this week. The U.S. wants Beijing to scrap the Made in China 2025 plan, a diplomatic source said.

With midterm elections looming in November, the Trump administration is eager to show progress on trade with China, a constant refrain during his run for the White House. But while Beijing is expected to offer ways to reduce the trade imbalance, it likely will refuse to reconsider its industrial self-sufficiency initiative.

As Nikkei points out, Beijing was initially reluctant to hold talks with the US. Beijing initially denied claims by senior Trump administration officials that informal talks had begun. But China has reluctantly agreed to participate to try and stave off a destabilizing trade war. 

The Trump administration's plans for a historic summit with North Korea could complicate trade talks as China becomes increasingly worried about its former satellite state's overtures to its Western rivals.

Trade problems with China also loom over the summit expected soon between Trump and North Korean leader Kim Jong Un, given that Chinese cooperation remains crucial to denuclearization of the Korean Peninsula. Some American officials think Beijing could link the North Korea nuclear issue to trade.

During an interview Thursday with CNBC from the Milken Conference, Ross confirmed that he's optimistic about the talks - though he was careful not to prejudge the outcome. Ross added that the US is committed to holding China accountable both for its dumping of steel and aluminum, as well as its theft of US intellectual property. According to Nikkei, one reason the White House extended its exemption on tariffs for the EU is because it's seeking the bloc's help to hold China accountable for its IP practices.

Nikkei added that the EU and Japan intend to join the US in a WTO complaint regarding China's institutionalized theft of intellectual property. Several American officials had advised Trump not to risk alienating the EU as it focuses on China, its primary target. The EU has also hinted at the prospect of a new trade deal with the US if it is granted a permanent exemption from the steel and aluminum tariffs.

Meanwhile, Lighthizer told the US Chamber of Commerce on Tuesday that the US isn't seeking to change China's state-controlled economic system. Rather, it's merely hoping to open China's economy to more foreign competition - something that Xi and He have committed to in recent talks where they declared that China would begin liberalizing its rules surrounding foreign automakers building and selling their wares inside China.

While trade concerns have largely receded over the past two weeks, investors will likely be watching closely for headlines from the talks. Furthermore, as the US seeks its detente with China, the Commerce Department is already preparing to open up yet another front in its international trade war. Case in point: Earlier today, the Commerce Department issued a preliminary determination to slap anti-dumping duties on imports of PET resin from Brazil, Indonesia, Taiwan, Pakistan and South Korea.

Comments

giovanni_f Dr. Acula Wed, 05/02/2018 - 03:23 Permalink

time is on China's and Russia's side. While by no means perfect countries, they are on an ascending path whereas "the West" is fubar. That might mansplain why the Western plutocrats are increasingly pushing for moar woar. They know that they are running out of time and there is no way to reverse this trend.

In reply to by Dr. Acula

Parrotile MozartIII Tue, 05/01/2018 - 21:37 Permalink

In view of very recent events (remember the ZTE issue??) why does the US think that China will WILLINGLY increase their dependence on the US for critical supply items?

The US is desperately scared that China will become much more independent. Being independent provides far less opportunity for "overseas management" of their Companies (and so their economy), to others' advantage.

Last week's demonstration of "US Might" was more than enough to ensure China will be far, FAR less "dependent" on US anything in the coming years.

 

In reply to by MozartIII

Posa Tue, 05/01/2018 - 21:30 Permalink

China MUST disengage from the US economy... the sooner the better... no matter what concessions are made, there are an infinite number more behind them that threaten China's destiny.

China's future lies in the BRI/ Made in China...  It also lies in turning the half of humanity that lives in poverty into affluent customers. The West is a sinking ship. Let it disintegrate.

Son of Captain Nemo Tue, 05/01/2018 - 21:35 Permalink

Well JHFC!...

I thought the American Corporations that outsourced to China all that cheap labour made that a "FACT"?... It ALL IS FUCKING MADE IN CHINA!!!

So Xi is supposed to lie and put Made in the U.S.A. instead???!!!!

Head "FUCKING EXPLODING"!!!

Herdee Tue, 05/01/2018 - 22:12 Permalink

Exceptionalism. The Country that got conned by their own politicians and banks Mr. Trump. Who's fault is that now? Look inside, just gut the government, but it's not happening. It's called "Restructuring". The economic reset will force it. It actually means that the U.S. will have one severally devalued fiat currency for domestic use and another for foreign trade. Look at the trade deficit, keep an eye on it along with the trillion dollar deficits. The trigger is in the Bond Market and then a serious change in the world's debt market which is a significant event for trader's too watch for coming into 2021. The world as a whole basically resets trillions in debt. Lynette Zang is doing a number of videos on it. Yes, things will get very expensive in the U.S. because of forced devaluation of the Dollar. You'll need Gold to pay off debts which will be paid off in hyper inflated fiat currency. It's your best insurance for protection.

JibjeResearch Tue, 05/01/2018 - 22:41 Permalink

What you say and feel on ZH is not relevant.

You should get some gold, crypto, stocks, and property. 

If you don't have it, you ain't nobody... STFU ...

 

Batman11 Wed, 05/02/2018 - 03:02 Permalink

In the US they use the left hand side of the brain to get the best return on their investments and the right hand side of the brain to worry about the new multi polar world.

The left side of my brain tells me to invest in China for higher profits.

The right hand side of my brain worries about a powerful China

Never the twain shall meet.

American exceptionalism didn’t extend to intelligence.

In fact, what are they exceptional at?

Delusional thinking

Batman11 Wed, 05/02/2018 - 03:04 Permalink

We could try and teach Trump the requirements of free trade.

Why did the jobs go to Mexico after NAFTA?

Think like an international investor (Donald likes to think of himself as a businessman).

Would you invest in the US?

The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

Disposable income = wages – (taxes + the cost of living)

Maximising profit requires minimising wages.

The minimum wage is set when disposable income equals zero.

The minimum wage = taxes + the cost of living

Would you invest in the US?

Of course not

Mexico, China and Asia look good.

Donald’s business instincts can get him to see the light, he likes profit.

Batman11 Batman11 Wed, 05/02/2018 - 03:05 Permalink

“Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus Deaton, Nobel Prize Winner

The interests of international capitalists and national rentiers are directly opposed.

It’s always been a choice.

The UK had to repeal the Corn laws to usher in the era of Laissez-Faire.

Do we look after the landed aristocracy and keep the Corn Laws or go for free trade and a low cost of living?

In reply to by Batman11