Trump Warns Xi: Trade War With China Begins Monday
As if there weren't enough geopolitical stress points in the world to fill a lifetime of "sleepy, vacationy" Augusts, late on Friday night President Trump spoke to Chinese President Xi Jinping and told him that he's preparing to order an investigation into Chinese trade practices next week, according to NBC. Politico confirms that Trump is ready to launch a new trade crackdown on China next week, citing an administration official, a step that Trump delayed two weeks ago under the guidance of his new Chief of Staff Gen. Kelly, but now appears imminent. It is also an escalation which most analysts agree will launch a trade war between Washington and Beijing.
As Politico details, Trump on Monday will call for an investigation into China over allegations that the nation violated U.S. intellectual property rights and forced technology transfers, the official said. While it's unclear how much detail Trump will get into in the announcement, administration officials expect U.S. Trade Representative Robert Lighthizer to open an investigation against China under Section 301 of the Trade Act of 1974. The ordering of the investigation will not immediately impose sanctions but could lead to steep tariffs on Chinese goods. Trump has expressed frustration in recent months over what he sees as China's unfair trade policies.
As we discussed two weeks ago, Trump had planned to launch the trade investigation more than a week ago, but he delayed the move in favor of securing China's support for expanded U.N. sanctions against North Korea, the senior administration official said.
The pending announcement also comes amid heightened tension between the United States and China, even after the Trump administration scored a victory in persuading Beijing to sign onto new United Nations sanctions on North Korea. Still, Trump has delayed trade action before, amid pressure from business groups and major trading partners:
Two Commerce Department reports examining whether to restrict steel and aluminum imports on national security grounds were expected by the end of June but have been bottled up in an internal review. Trading partners raised threats of retaliation and domestic steel users complained of being hurt by price increases and restricted supply.
The trade investigation will immediately strain relations between the U.S. and China as the two countries wrestle with the unpredictable situation over North Korea. Should Trump follow through, the move will lay the groundwork for Trump to impose tariffs against Chinese imports, which will mark a significant escalation in his efforts to reshape the trade relationship between the world's two largest economies. In other words, even if there is now conventional war announced with either North Korea or Venezuela, Trump's next step is to launch a trade war against China.
"The United States government can, and does, work with countries to address serious concerns such as North Korea while also pursuing measures to address economic concerns, such as the theft of U.S. intellectual property," a U.S. National Security Council official said.
It wasn't immediately clear how China would react to the move.
When reports of the potential trade investigation first emerged more than a week ago, China's Commerce Ministry stressed the importance of U.S.-China trade ties and of resolving differences "through dialogue and consultation."
"We would like to emphasize that the Chinese government has always attached importance to intellectual property protection," a spokesman said. "The results are there for all to see."
Trump, who has been residing at his golf club in Bedminster, New Jersey, for the past week, plans to return to Washington on Monday to officially announce the trade investigation. The decision will not only take action against alleged Chinese violations of U.S. companies' intellectual property rights, but could also be perceived as an attempt by the U.S. government to crank up the pressure on Beijing to rein in North Korea. "I think China can do a lot more," Trump told reporters on Thursday. "And I think China will do a lot more."
As CNN adds, the trade investigation is expected to be only one part of a multi-pronged push by the Trump administration to counter perceived Chinese trade abuses. The administration has been eyeing other moves to rebalance the U.S.-China trading relationship. But analysts have cautioned that Trump faces a huge challenge in his desire to significantly reduce the U.S. trade deficit with China, which last year stood at more than $300 billion. "Protection measures against some specific items, such as steel and aluminum, may gain political favors, but are not likely to be of much help to rebalance trade," economists at the Institute of International Finance wrote in a research note this week.