Saturday, June 30, 2018

Trump is about to escalate his trade war with China

Trump wants to limit Chinese investment in the US. China will strike back.

By Zeeshan  Jun 26, 2018, 3:30pm EDT

President Donald Trump is on the verge of escalating his trade war with China.

By the end of this week, the Trump administration is expected to release details of plans to restrict Chinese investment in American businesses and block the ability of US businesses to sell some high-tech products to China.

The purpose of the move is to sharply limit China’s access to cutting-edge US technology and thwart the country’s ambition to become the world’s greatest tech hub.

Analysts say the new policies will escalate already sky-high trade tensions between the world’s two biggest economies and are bound to provoke a forceful retaliation from Beijing. It comes after Trump announced on June 15 that his administration will impose tariffs on $50 billion worth of Chinese goods and after threats of tariffs on up to $400 billion more in the future.

Like the tariffs, Trump’s new move will also deal a blow to China’s economy, but it will target something different. It won’t make it harder for China to sell goods in the US and compete with domestic manufacturers. Instead, it strikes at China’s strategy for developing its economy in the future.

At a moment when tensions are running high, “this is a way of communicating to Beijing that the US has a lot of tools at its disposal and it will consider using all of them,” Todd Tucker, a trade scholar at the Roosevelt Institute, a liberal-leaning think tank, told me.

Trump is locked in a battle with China on many fronts
Over the past few months, Trump has begun to execute his promise to crack down on China’s influence on the US economy.

On June 15, the administration said that $34 billion worth of Chinese goods will be subject to tariffs starting July 6, with an additional $16 billion worth of products undergoing further review and public hearings.

Within a day, China promised to retaliate against those tariffs with its own tariffs of “the same strength,” and said it would purposely impose tariffs that will affect American farmers and industrial workers in the Midwest — states that have large populations of Republican voting Trump supporters.

In response, Trump threatened to impose tariffs on up to $400 billion of Chinese exports on June 18.

The recent back-and-forth puts the US and China in the early stages of what could be a sustained trade war, in which both countries continue to strike at each other’s economies with increasingly expansive tariffs.

Trump’s new planned restrictions on Chinese investment and exports to China open up yet another front in the US-Chinese clash.

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