Without Allies, Trump’s China Tariffs Could Backfire

The president’s steel and aluminum tariffs may threaten a larger effort to combat Chinese intellectual-property theft.

President Trump before he signs a presidential memorandum imposing tariffs and investment restrictions on China at the White House on Thursday.
AP Photo/Evan Vucci
March 22, 2018, 8 p.m.

President Trump’s love of tariffs may jeopardize a global fight against Chinese trade practices, even as the administration takes sweeping action on the East Asian behemoth.

That’s because the U.S. needs allies in combatting Chinese intellectual-property theft. And those historic partners are bristling at tariffs—particularly those on metals—that may soon hit their products.

“The United States should encourage a unified position between itself and key allies,” Jake Colvin, head of global trade policy at the National Foreign Trade Council, told National Journal. “The steel and aluminum tariffs complicate the relationship.”

On Thursday, Trump called for tariffs on as much as $60 billion in Chinese imports. The administration also plans to restrict Chinese investment and launch a World Trade Organization dispute, where those allies could prove critical.

But that announcement comes at a time when the administration is heavily weighing tariffs on metal imports from the European Union, South Korea, Canada, and others. U.S. Trade Representative Robert Lighthizer gave some temporary relief on that front Thursday, telling Congress that Trump is pausing that action while negotiations continue.

The initial announcement on the metal tariffs is set for Friday.

Trade experts, however, are skeptical that the administration would follow through on full exemptions. The countries laid out by Lighthizer account for about half of total U.S. steel imports.

Such large-scale immunity would anger some White House officials and the steel community, a key support base for the president.

“The problem is that you’ve got these steel firms and steelworkers nipping at his heels,” said Gary Hufbauer, a longtime trade expert at the Peterson Institute for International Economics. “It’s hard to see this all leading to both the steel sector being happy and the allies being happy as well.”

The U.S., EU, and Japan just months ago joined together to blast many key parts of the Chinese neo-mercantilist economy, such as market-distorting subsidies and requirements that foreign companies hand over technologies to host countries.

“We, to address this critical concern, agreed to enhance trilateral cooperation in the WTO and in other forums, as appropriate, to eliminate these and other unfair market distorting and protectionist practices by third countries,” they said in a statement during a December WTO summit.

Colvin said the U.S. should continue that partnership rather than confront partners and go at China alone.

“Unilateral U.S. tariffs are premature and are unlikely to change China’s behavior,” he said. “One concern that we have with the use of tariffs by the United States is it takes the focus off of Chinese behavior and puts it onto our own.”

The Chinese tariffs are far from a one-off. This year, the Trump administration has slapped tariffs on solar panels and washing machines, on top of the metals. Many trade analysts often say those tariffs, which cover all imports rather than specific countries, fail to confront the real target: China, which floods the globe with cheap product.

Lighthizer said the administration would now take aim at technologically sophisticated Chinese products, such as robotics, transportation equipment, clean-energy vehicles, and advanced medical products, among others.

“They say that they want to be mostly self-sufficient in two or three years and world-dominant by China 2025” for all those products, Lighthizer said, referring to a Chinese economic initiative. “This is not like our spies figuring this out. They put this out and say this.”

Many industry lobbyists fear that more products may be covered, either in the initial announcement or later tranches.

“We’ve got some pretty clear indications that apparel would likely show up on the list,” said David French, a government relations official at the National Retail Federation, which relies heavily on imports from China.

Trump backed up that suspicion Thursday. “This is the first of many. This is No. 1, but this is the first of many,” he said.

The dispute that the U.S. is taking to the WTO could be the forum, however, that showcases the damage done by alienating allies. Such disputes are more potent with other countries joining alongside.

“You wouldn’t want it to be the U.S. vs. China. You’d want it to be the U.S., EU, Japan, Brazil—a whole bunch of allies—going after China,” one lobbyist close to the China tariff process, who asked to not be named because more developments are likely to come, said. “But I don’t know if anybody will be with us at the WTO for a case because” of the steel tariffs.

U.S. agriculture and exporters, the likely target of Chinese retaliatory tariffs, could lose big in a failed effort to combat China.

Still, some in the trade world, along with lawmakers on Capitol Hill, think Trump’s trade policy may be more bluster than bite. “In pure Trump form, he’s more about going over and bashing you in the nose and then saying, ‘Oh, let’s go and sit on the couch,’ [and he gives] you some ice,” Kenny Marchant, a member of the House panel that oversees trade policy, told National Journal. “And then as things play out, the worst part of the whole deal was the announcement.”

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