The Trump administration is considering clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property, according to people familiar with the matter.
An announcement following an investigation by the U.S. Trade Representative’s office into China’s IP practices is expected in the coming weeks, potentially handing President Donald Trump further cause to impose trade restrictions. His announcement last week of tariffs on steel and aluminum imports has already ratcheted up global trade tensions — and led to the resignation Tuesday of his chief economic adviser Gary Cohn, who opposes such measures.
“The U.S. is acting swiftly on intellectual property theft. We cannot allow this to happen as it has for many years!” Trump said in a Twitter post on Wednesday. In an earlier tweet, he said China has been asked to develop a plan to reduce their “massive trade deficit with the United States.”
“Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with,” the president stated. “We must act soon!”
Stocks fell, and Treasuries rose on Wednesday on concern trade disruptions will hurt the global economy. Trump tweeted he’ll be making a decision on a replacement soon and that there are “many people wanting the job.”
Adding to the administration’s angst about trade fairness, the U.S. trade deficit widened more than forecast in January to a post-recession high. The gap increased 5 percent to $56.6 billion, the biggest since October 2008, from a revised $53.9 billion in the prior month, Commerce Department data showed Wednesday.
The president is now fighting trade offensives on multiple fronts, from targeting strategic rival China to angering allies like Canada and the European Union with threats to erect fresh barriers. While his counterparts have threatened retaliation, concrete action that would herald the start of an all-out trade war has yet to come.
Liu He, President Xi Jinping’s top economic adviser who met with Cohn in Washington last week, told delegates at the National People’s Congress in Beijing that both sides had expressed a desire to avoid a trade war, according to the Beijing Youth Daily. Chinese officials — who have been studying curbs on U.S. products such as soybeans according to past reports — were otherwise largely quiet on the tariff question Wednesday.
Under the most severe scenario being weighed, the U.S. could impose tariffs on a wide range of Chinese imports, from shoes and clothing to consumer electronics, according to two people familiar with the matter who spoke on condition of anonymity because the discussions aren’t public.
The Trump administration could combine the tariffs with restrictions on Chinese investments in the U.S., which are reviewed for national-security risks by Treasury’s Committee on Foreign Investment in the U.S., the people said. The new measures being considered by the administration could go beyond even domestic security considerations.
What our economists say…
"Gumming up the flow of trade, coming at a time of close to full employment for the U.S., tariffs are more likely to result in higher inflation than higher output," Tom Orlik, chief Asia economist for Bloomberg Economics, wrote in a note. "For the U.S., there are plenty of reasons to avoid tipping relations with China into an all-out trade war. The damage that would inflict on U.S. firms’ supply chains, sticker shock for U.S. shoppers at Walmart and Target, and the risk of higher inflation suggest cooler minds would eventually prevail."
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