Donald Trump is set to launch his first major trade action targeted at China on Monday by ordering his top trade negotiator to begin an investigation into intellectual property rules that Beijing uses to force foreign investors to turn over valuable technologies.
The move, which comes as the US continues to push China to do more to pressure neighbouring North Korea to abandon its nuclear programme, marks a significant turn in the Trump administration’s approach to China and is bound to increase trade tension between the world’s two largest economies.
It is also likely to win backing from Congress and a large swath of the US business community that has long complained about Chinese IP rules.
The US president will sign an executive memorandum requesting Robert Lighthizer, his trade representative, consider using a 1974 statute employed rarely since the 1990s creation of the World Trade Organization. The law would allow the president to eventually unilaterally impose tariffs and other trade penalties against China over its IP practices.
The move is a far cry from the broad 45 per cent tariffs that Mr Trump threatened to impose on China during last year’s presidential campaign. But it signals a tougher approach, with Mr Lighthizer, who served in the Reagan administration, being one of a number of China hawks in Mr Trump’s cabinet.
It also is part of an effort by the Trump administration to inject new energy into a trade agenda that has lost some of its campaign edge since the president pulled the US out of the 12-country Trans-Pacific Partnership on his third day in office.
National security investigations into imports of aluminium and steel, aimed largely at Chinese overproduction, have bogged down in objections from business and allies in Asia and Europe who complain that they will suffer the brunt of the consequences.
Mr Trump has also decided to renegotiate rather than abandon the North American Free Trade Agreement with Canada and Mexico, with officials from all three sides due to begin their formal work in Washington on Wednesday.
Technically, Monday’s move will launch a process including consultations with Congress. Calls there have been growing for Mr Trump to take a tougher approach to China. Within weeks it is expected to see the launch of a formal investigation that could take up to a year and would include negotiations with Beijing and wider consultations with business.
In recent days, Mr Trump has again made the link between Chinese help on dealing with North Korea and any US trade actions against China. An announcement regarding the IP move that had been expected earlier this month was delayed because of US efforts to secure Chinese support for new UN sanctions against Pyongyang.
But US officials on Saturday played down any link with the crisis in North Korea. “These are two different things. North Korea is a shared security threat and it is in the interest of both the United States and China to work to resolve that issue. The concerns about China’s trading practices are longstanding and it’s natural for two economies as large as ours to have differences about this,” one senior administration official told reporters.
They also insisted that Mr Trump’s actions were not intended to trigger a trade war with Beijing.
“I don’t believe we are heading toward a period of greater conflict. This is simply business between two countries,” another senior administration official said. “We have, basically, issues related to the theft and forced transfer of our technology. The president has been firm about the need to stop that. He has made it clear to the American people that he will stand up for American businesses and American workers. I think China well understands that.”
“This will be a negotiation under the rules of international law and there’s no need for there to be increased conflict,” the official added.
The White House also conceded that the new action was a reflection of the limited successes it has had engaging with China on trade in the first six months of the Trump administration and the need for a new approach.
A 100-day plan launched after an April meeting between Mr Trump and Chinese leader Xi Jinping yielded a few minor concessions from Beijing, including agreements to resume imports of US beef and do more to open up its market for US credit card companies. The process, however, was criticised by the business community for not addressing larger systemic issues with China such as its intellectual property regime.
A meeting in Washington last month between senior US and Chinese officials to mark the end of that 100-day period broke up without any further progress after the US sought firm commitments from China to do more to rein in the steel production.
“The president made it clear that during the first 100 days we discussed at length issues related to trade and we were unable to resolve our differences on a number of things. And high on that list were a number of things related specifically to the forced transfer of IP,” a senior administration official said. “So the action that is being taken on Monday is a reflection of the president’s strong commitment to addressing this problem in a full way. And that is the path that we are taking.”