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China Conference 2018

Donald Trump ‘may be ready to press’ the punitive China tariff button

Former US State Department official says political pressure is mounting for the US president to take action against his country’s biggest trade partner

PUBLISHED : Thursday, 11 January, 2018, 4:21pm
UPDATED : Friday, 23 March, 2018, 12:05pm

US President Donald Trump might soon take executive action against China in the form of punitive tariffs, a former senior US State Department official warned in Hong Kong on Thursday.

Daniel Russel, former assistant secretary of state for East Asian and Pacific affairs, said political pressure might force Trump to act soon, especially with the US business community no longer Beijing’s ally in the fight against protectionist measures.

“The warning signs that point towards some sort of some series of tough trade actions by the Trump administration towards China are unmistakable,” Russel said at the South China Morning Post’s annual China Conference.

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He said there was “not only wide political movement, both grass roots and congressional, behind the sense that tough action is going to be needed to convince China to make adjustments, but most worrisome is that the US business community, while not united”, had become too frustrated by obstacles it faced operating in China to fight protectionist policies aimed at Beijing.

Trump drew support during the 2016 presidential election primaries by proposing a 45 per cent tariff on imports of goods from China. He backed away from that threat before he met his counterpart Xi Jinping in Florida less than three months after assuming office.

Trump’s vows to take a harder line against Beijing re-emerged several months later, partly in response to Trump’s dissatisfaction over China’s role in the effort to halt North Korea’s nuclear weapons programme.

Signs of Trump’s intentions on China, the United States’ biggest trading partner, came into clearer focus last month, when he accused Beijing of “attempting to erode American security and prosperity”.

Rules requiring foreign companies operating in China to share proprietary intellectual property with joint venture partners have fanned calls from industry groups – including the American Chamber of Commerce in China – for more reciprocity, or equality in the way foreign firms are treated in China.

Restrictions on foreign investment in sectors including finance, media and telecommunications, in place as part of the terms of China’s accession to the World Trade Organisation, have also raised pressure to force Beijing to liberalise its investment rules.

China’s exports rally on weak yuan, ‘Trump tariff threats’

Although Trump made China’s trade surplus with the US a key issue in his winning election campaign, the imbalance has continued to grow. The surplus hit US$344 billion in the first 11 months of 2017, putting it on track to surpass the 2016 imbalance of about US$350 billion. The surplus rose 0.6 per cent year on year in November.

“There’s a group of people supporting Trump that are real hawks when it comes to taking action, and the administration has been signalling its intent to take action,” Russel said.

“It’s one thing to take specific 301 or other trade enforcement action consistent with the WTO, but the warning sign would be any indication that President Trump is seriously moving to use his authorities to impose tariffs on Chinese goods.”

Just how badly could Trump’s threatened 45pc tariff hurt China?

Russel was referring to Washington’s ongoing investigation into Chinese regulations that force US companies operating in China to transfer technology and intellectual property rights to local business partners under section 301 of the US Trade Act of 1974.

Trump has used executive orders more than most US presidents in recent history to avoid complicating factors like the WTO framework as well as the US judicial and legislative branches of government.

Trump issues 58 presidential executive orders a year, according to The American Presidency Project, which tracks the orders back to founding US president George Washington. That compares with 35 for his predecessor Barack Obama, 36 for George W Bush and 46 for Bill Clinton.