US trade tensions with China rising - NAB

Economic relations with China, the world’s biggest economy and trader, were a central issue in President Trump’s election campaign as he expressed his concern over the fairness of Chinese competition in global markets throughout last year – focussing on the US trade deficit, alleged Chinese “currency manipulation”, unfair trade, subsidised output, breaches of US intellectual property etc, points out the research team at NAB.

Key Quotes

“During the campaign various measures were outlined for Chinese trade – declaring the country to be a “currency manipulator”, imposing 45% tariffs on goods imported from China and using a battery of existing US trade laws to prevent trade that was unfair or damaged US security and economic interests.”

“In the event, the US Treasury failed to label China as a “currency manipulator” in April. China was, however, listed as one of 6 countries whose trade policies warranted close watching and there will be another report this October assessing Chinese currency policy. US corporates have huge interests in China and many will be concerned by overly-restrictive economic measures.”

“After an initially quiet start, the number of potential trade actions against China has started to ramp up in the last few months:

1. The President has ordered investigations into whether imports of steel and aluminium damage US national security. China is not the only country targeted but it dominates world production of both and sectors like shipbuilding, aircraft, vehicles and electronics could be added to the list of sectors under review. This could all end up with US tariffs on these industries to preserve its industrial capacity.

2. The US has launched a 301 case against alleged Chinese violations of US intellectual property that have harmed US commerce after the latest US review of IP protection and enforcement around the world singled out China as needing attention. Again, this could end up with new tariffs.

3. The President has ordered an investigation into “significant trade deficits”, looking at whether unfair trade is involved and what can be done to remedy the situation.

4. The US trade agency’s “primary objective” is now to combat unfair trade from China using anti-dumping and countervailing (anti-subsidy) measures and we can probably expect to see more cases.

5. The US has launched cases in the World Trade Organisation aimed at China’s system of farm support where subsidies and tariff quotas are allegedly breaking the rules on agricultural support measures.”