Signs Point To Trump Getting Tougher On China Over Trade

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For all his harsh rhetoric about unfair trade practices by China, President Trump stopped short of taking any punitive actions against Beijing during his first year in office.

That may be about to change, however.

Over the next few weeks, the Trump Administration is expected to release the results of a seven-month investigation into Chinese trade practices, under Section 301 of the Trade Act of 1974, a move that could lead to punitive actions against the country and at worst provoke a trade war that would hurt a lot of US businesses.

"The Trump Administration has made it very clear that it believes that it has the authority under Section 301 to threaten or impose tariffs on China directly over these practices," says Edward Alden, senior fellow at the Council on Foreign Relations.

Section 301 gives the president wide latitude to impose penalties such as reciprocal bans on cross-border investments and tariffs on a wide variety of Chinese goods, he says.

It also could band together with allies to force China's hand at the World Trade Organization. Countries in Asia, Latin America and Europe have long complained about Chinese trade practices such as forced transfers of technology, illegal government subsidies and dumping of low-cost exports in an effort to weaken competitors.

"I think there's a widespread and growing consensus around the world that China is not playing by the rules and that together we as allies and trading partners need to take many, many different kinds of measures to ensure a level playing field," says Trump trade adviser Peter Navarro, a staunch China critic.

Trump has been excoriating China for years, accusing it of blocking access to its markets for foreign companies.

Once in office, he has been slow to match his rhetoric with actions. His administration failed to label China a currency manipulator, even though Trump promised to do so during the campaign.

He may have hesitated in part because he needed Beijing's help with North Korea, and because the prospect of a trade war scares US companies such as Boeing, which earn a lot of money in China.

But a clash seems almost inevitable, given China's outsized role in global trade today.

"If you're concerned about the large US trade deficit, which the president is and has said he is repeatedly, most of that's a China problem," Alden says.

Still, any move to punish China carries risks for the United States and the world as a whole.

The countries of the world have spent decades carefully crafting laws meant to regulate the flow of trade, says Dan Ikenson, director of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies. Dispute between nations are meant to be settled at the WTO.

If the US opts to act on its own, it could undermine the infrastructure of global trade in a way that causes more problems than it solves, he says.

"My main concern is that we actually go forward with these unilateral duties, and the rest of the world sees the United States as disavowing the WTO, China retaliates and the costs start to spread across the US economy," he says.

While China has sometimes shown it's willing to change some of its more egregious trade practices, it's also made clear it will go at its own pace.

Too much pressure from Washington is likely to be seen as bullying by Beijing and could invite retaliation against US companies.

But after lobbing so much criticism at China over the years, Trump may feel he has little choice but to take action of some kind.

As Navarro sees it, such action has been a long time coming.

"It's staggering—staggering!—what China does in terms of cheating the international system, and it's refreshing that we finally have a president that's standing up for all the American people and standing up to China on all this."

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