Fearing trade war, US Inc. pleads with both Trump and China
Businesses are stuck between rock and hard place, unhappy with Chinese policy and concerned by White House rhetoric
Amid ongoing investigations into Chinese trade practices, American business groups have been speaking out with two loud and clear messages. Beijing’s domestic policies are unfair to foreign businesses, but Washington must step carefully.
Industry groups this week echoed the Trump administration’s assertion that the World Trade Organization was not equipped to address Chinese practices seen as unfair. China’s regulatory regime “puts a thumb on the competitive scale in a way that significantly and profoundly affects US-based and foreign companies,” said Josh Kallmer of the Information Technology Industry Council at hearing on Wednesday.
A representative from the US Chamber of Commerce stressed at the hearing, held by the office of the US Trade Representative (USTR), that even with full WTO compliance, not all of these policies could be changed.
While pushing for changes to China’s policies, the American Chamber of Commerce in Shanghai also made clear in earlier remarks to the USTR that “A tit-for-tat trade war would be damaging for all parties.”
The comments, submitted ahead of next week’s USTR hearing on the section 301 investigation into China’s trade practices, emphasized that because of “the scale of US investment in China, and the significant size of China business for many US corporations, it is important that US actions not put those interests at risk.”
Any action, the Chamber urged “should be carefully constructed and well-grounded in objectivity.”
Other groups echoed this sentiment. The US National Foreign Trade Council said in their statement to USTR that Washington needs to “work through these and other trade-related problems with China in ways that are consistent with the open, rules-based trading system that the United States has built.”
The US-China Business Council advised that the “ultimate goal” of a Section 301 investigation should not be imposing tariffs or restricting trade, but be the elimination of unfair domestic Chinese regulations.
Their concerns come in response to continued warnings, including from the president himself, that the US is prepared to slap tariffs and other restrictions on imports from China. A rare account of an oval office meeting reported in August that Trump had grown frustrated with “globalists” who have been resisting his China trade agenda.
“I want you to know, this is my view,” Trump allegedly said to his chief of staff before signing the order to launch the Section 301 probe. “I want tariffs. And I want someone to bring me some tariffs.”
Under domestic law, Section 301 of the US Trade Act of 1974 allows the USTR to investigate and take unilateral retaliatory action in response to harm caused by trade practices. Before the establishment of the WTO dispute settlement system the statute was used frequently, including in the 1980’s when current USTR Robert Lighthizer was deputy USTR.
The groups’ comments to the administration show American businesses are wary of the retaliation that would result from any substantial trade restrictions placed on China, including through the Section 301 process.
Chinese trade groups have also sent a clear message to the White House. In their comments to the USTR ahead of the hearing next week, the China Chamber of International Commerce said “any unilateral retaliatory action by the United States may lead to counter-measures.”
Actions taken outside the multilateral trade framework “may trigger a ‘trade war’ between the United States and China and bring great loss to businesses and ordinary people in both countries,” the group added.
“Implementation of the Section 301 Investigation shall be regarded as an act of US unilateralism,” the China Enterprise Confederation said, “and will harm the two sides as well as US enterprises that will also suffer from such an act.”
The Trump administration’s reluctance to follow through on any dramatic trade challenge to China continued on Thursday when the Commerce Department deferred two major China trade decisions. The move delays any determination on an antidumping duty investigation on aluminum foil from China, as well as results of a related review of China’s non-market economy status until after Trump’s upcoming trip to China.
The deferral comes after Commerce Secretary Wilbur Ross’ recent visit to Beijing and as pressure has been building for the two countries to make progress on trade after disappointing trade talks held in July. The first ever Comprehensive Economic Dialogue, hailed as a major development in bilateral ties when first proposed following the Trump-Xi summit, failed to produce even a joint statement.
While in Beijing, Ross hyped Trump’s upcoming trip to China, saying “we are looking forward to a very good session including a lot of American CEOs and we hope there will be some very good deliverables.”