Donald Trump sends trade hawks to China as US considers further action against Beijing

Donald Trump has added some of the leading trade hawks in his administration to a delegation visiting China next week as sources close to the ongoing talks warned that the US was considering further action against Beijing.

US Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro will join Treasury Secretary Steven Mnuchin and National Economic Council head Larry Kudlow in the party that will meet Chinese officials, including President Xi Jinping and vice-president Wang Qishan, on May 3 and 4, a source who is familiar with the situation said.

The possibility of Mnuchin visiting China was raised in February when Liu He, one of Xi’s top economic officials, visited the US, the source added. That visit ended without any tangible outcome.

The US President announced the trip on Tuesday, saying Mnuchin, Lighthizer and “a couple of other folks” would visit China.

“We’re having very substantive discussions on trade. I believe the trade will work out, but I also think the China has never treated us with more respect than they have over the last short period of time that I’m president,” Trump said.

China’s Ministry of Foreign Affairs did not confirm the visit but said on Wednesday that China welcomed the message that the US wanted discussions.

But the source was cautious that the talks would lead to a breakthrough.

The United States Trade Representative is considering starting another investigation under Section 301 of the 1974 Trade Act against China’s cloud computing sector. The legislation has already been used to investigate intellectual property.

The US Treasury Department is also working on measures to restrict Chinese investment in sensitive sectors in the US and control American exports to China, another source familiar with the situation said. The measures may be released next month.

Separately, the US Congress is revising the law to expand the remit of the Committee on Foreign Investment in the United States to allow for greater scrutiny of investments from countries such as Russia and China.

One of the sources said that although Mnuchin was “more open to negotiations” with China, the Trump administration believed he could not fully represent the administration and had added Lighthizer, who is more sceptical about talks, and Navarro, a fierce critic of Beijing to the delegation.

Earlier this month Trump announced punitive tariffs targeting some US$50 billion in annual imports from China as seeks to reduce the trade deficit between the two countries by US$100 billion.

He also wants action from Beijing following a six-month investigation into intellectual property violations, while US businesses have called for greater market access and fairer competition.

The trade action is expected to take effect next month after a period of review and comment by American industry.

Trump has also threatened to target an additional US$100 billion worth of Chinese imports, while Beijing has retaliated by announcing tariffs it will impose on more than US$50 billion worth of goods from the US, including soybeans and other products produced in Trump’s political heartland.

The source said US companies in China have already felt the chill from the brewing trade war, experiencing problems such as delays to licence approvals and reviews of mergers and acquisitions, as well as longer waits to clear customs.

While it would be easy for China to cut the surplus by importing more US goods, the source said Beijing was less willing to discussing structural issues, such as changes to its industrial policy.

President Xi Jinping announced measures to further open up the financial services and manufacturing sectors last week, but observers said the moves were very superficial and were too little and too late. Analysts have also warned that the economic stand-off between Beijing and Washington could last a long time and ruled out a quick deal to fix deep-rooted problems such as the state-dominated economy.

“China won’t stop state-owned enterprises from distorting the market, won’t alter Made in China 2025 and won’t change the way it lends to Belt and Road projects,” the person said.