March 31, 2018

This Is How Trump Can Successfully Navigate the China Trade Trap

By: Peter Harrell

Foreign-policy experts and America’s allies have roundly criticized President Trump’s new tariffs and investment restrictions as a potential opening salvo in a global trade war. But at least rhetorically, the Trump administration argues that its goal is not simply to protect American industries from foreign competition. Rather, the Trump administration argues that it wants to use the tariffs and investment restrictions as part of a strategy to finally pry open China to U.S. business.

The Trump administration is correct about the need for a tougher approach to China’s unfair trade practices. Despite a handful of positive macroeconomic reforms, under President Xi Jinping the general trend has been to increase the Chinese state’s role business. For example, over the past year China has pressed U.S. and European businesses operating joint ventures in China to give the Chinese Communist Party cells a formal role in corporate decisionmaking, which could turn companies into agents of Chinese policy. China’s “Made in China 2025” national development strategy, meanwhile, is combining billions of dollars in subsidies, favorable regulations, restrictions on foreign access to the Chinese market, and other policies to promote the explicit goal of Chinese companies dominating ten global industries, including information technology, energy-efficient vehicles, and aviation, by 2025. U.S. Trade Representative Robert Lighthizer last week issued a report finding that Chinese requirements forcing U.S. firms to transfer technology to China and outright theft cost the United States billions of dollars a year.

Read the full op-ed on National Interest.

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