In adding various tariffs, the U.S. administration is relying partly on Section 301 of the Trade Act of 1974 to prevent what it calls unfair trade practices and theft of intellectual property. This gives the president the authority to unilaterally impose fines or other penalties on a trading partner if it is deemed to be unfairly harming U.S. business interests, especially if it violated international trade agreements. In August 2017, the U.S. opened a formal investigation into attacks on the intellectual property of the U.S. and its allies, which cost the U.S. alone an estimated $225–600 billion a year in losses. In 2018, regardless of tariffs imposed by the Trump administration, China’s annual trade surplus reached a record of $323.32 billion. As a rebuttal against United States trade pressure; on September 24, 2018, China issued a white paper on the facts of Sino-U.S. economic and trade friction and China's position. On December 14, China's State Council Tariff Tax Committee decided to suspend the imposition of tariffs on automobiles and parts originating in the United States for three months from January 1, 2019, involving 211 tax items.
The result is that the U.S. believes Chinese laws undermine intellectual property rights by forcing foreign companies to engage in joint ventures with Chinese companies, which then gives the Chinese companies access and permission to use, improve, copy or steal their technologies. The U.S. also raises concerns that China fails to recognize legitimate patents and copyrights, and discriminates against foreign imported technology, and that China has instituted numerous non-tariff barriers which have insulated sectors of the Chinese economy from international competition. Thus, the trade war is seen as largely focused on intellectual property in China, especially regarding technology.
However, China claims it has strengthened IPR protections and that the U.S. has ignored this; that the U.S. has ignored WTO rules and ignored the calls of its own industries to reduce tariffs. China firmly opposes these U.S. trade practices, claiming they represent "unilateralism" and "protectionism".
Chinese state-owned enterprises and state capitalismprincelings gain the most benefits in most activities including the Belt and Road Initiative and Made in China 2025. The U.S., Japan, Canada, Mexico, E.U. countries do not recognize China as a market economy, alleging market distortions. Economist Irwin Stelzer states China's centrally directed economy with its goal to preserve communist party control of the politics and economy is relevant to U.S. trade policy.Political scientist and former White House national security officer Aaron Friedberg has also said the communist party regime has expanded its use of state-directed, market-distorting, mercantilist policies, especially since 2008. The 2018 Congressional hearing "U.S. Tools to Address Chinese Market Distortions" discussed how "the Party leads everything" doctrine makes China's economy hard for the trading rules to deal with and results in many U.S. businesses bowing to pressure even though their decisions may jeopardize the future of their companies and the U.S. economy as a whole. The structural problem of the Chinese communist party's fundamental opposition to free-market capitalism and fair competition is claimed by US to be the root of U.S.-China economic tensions.
The rapidly increasing U.S. trade imbalance with China
President Trump in his 2018 U.N. speech stated "China's market distortions and the way they deal cannot be tolerated," while also saying "socialism or communism... produces suffering, corruption... leads to expansion, incursion, and oppression. All nations of the world should resist socialism and the misery that it brings to everyone," which was seen as also targeting China. The White House criticizes China's market-distorting policies within China and around the globe. The White House report, the USTR report, Vice President Mike Pence's landmark China-focused speech and Congressional report claims the forced installation of communist party committees and communist board members in all companies, state-owned, non-state-owned, and joint venture foreign companies, to implement its policies, influence and even form veto power in hiring, selecting leadership, and investment decision-making and can be inconsistent with market signals.VP Pence blames "China has chosen economic aggression, which has in turn emboldened its growing military." President Trump's China issues adviser Michael Pillsbury says the administration's demands challenge all the core elements of China's economic system and its links to the constitution of the communist party.
Accusation of theft of intellectual property, technology and trade secrets
Richard Trumka, president of the AFL-CIO, which represents over 12 million active and retired workers, said that China had stolen U.S. intellectual property and "bullied its way into acquiring critical U.S. advances in technology." He stated in March 2018 that "Tariffs aren't an end goal, but an important tool to end trade practices that kill American jobs and drive down American pay."
In August 2017, the US opened a formal investigation into attacks on the intellectual property of the U.S. and its allies, which cost the U.S. alone an estimated $225–600 billion a year.
State media declared that the PRC government's attitude toward the protection of intellectual property rights is clear and firm, and it has continuously strengthened protection at the legislative, law enforcement and judicial levels, and achieved remarkable results.
Forced technology transfer from US companies to Chinese entities
China requires technology transfer through foreign direct investment (FDI) regime and required joint ventures: In many cases, technology transfers are effectively required by China's Foreign Direct Investment (FDI) regime, which closes off important sectors of the economy to foreign firms. In order to gain access to these sectors, China forces foreign firms to enter into joint ventures with Chinese entities they do not have any connection.
A number of experts have focused on what they claim is China's "theft" of intellectual property, and that it forces U.S. firms that want to do business there into transferring its confidential technology and trade secrets before having access to their market. Although that kind of transfer is disallowed by the WTO, the negotiations are usually conducted in secret to avoid penalties.
The Commission on the Theft of American Intellectual Property states “Just agreeing to manufacture in China opens yourself” to theft or forced technology transfer. It requires a U.S. response based on “strength and leverage.”
In 2018 the American Chamber of Commerce in China learned that over half its members thought that "leakage of intellectual property" was an important concern when doing business there. Similarly, the EU Chamber of Commerce has also complained that European companies wanting access to the Chinese market often had to agree to transfer vital technology.
Former US Treasury Secretary for Clinton and economist Larry Summers once said, “China’s technological progress is coming from terrific entrepreneurs who are getting the benefit of huge government investment in basic science. It’s coming from an educational system that’s privileging excellence, concentrating on science and technology. That’s where their leadership in some technologies is coming from, not from taking a stake in some US company.”
Reasons for the US to implement tariff sanctions
U.S. trade deficit (in billions, goods and services) by country in 2017
In June 2016, as presidential candidate, Donald Trump vowed to cancel international trade deals and go on an offensive against Chinese economic practices, describing his promise as a reaction against "a leadership class that worships globalism." Less than a year after he took office, the United States, European Union and Japan, agreed to work within the World Trade Organization (WTO) and other multilateral groups to eliminate unfair subsidies by countries, which create noncompetitive conditions through state-owned enterprises, “forced” technology transfers and local content requirements.
In April 2018, Trump denied that the dispute was actually a trade war, saying "that war was lost many years ago by the foolish, or incompetent, people who represented the U.S." He added: "Now we have a trade deficit of $500 billion a year, with intellectual property (IP) theft of another $300 billion.[a] We cannot let this continue."
In January 2018, Trump said he wanted the United States to have a good relationship with China, but insisted that it treat the United States fairly. In his State of the Union Address a few weeks later, he stated:
America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth. The era of economic surrender is over. From now on, we expect trading relationships to be fair and to be reciprocal. We will work to fix bad trade deals and negotiate new ones. And we will protect American workers and American intellectual property, through strong enforcement of our trade rules.
A number of government and industry experts have offered their own rationales about why the tariffs are, or are not, appropriate:
John Ferriola, the CEO and President of Nucor, America's largest steel producer and its largest metal recycler, claimed that tariffs were not unfair, but were "simply leveling the playing field." He explained to TV host Jim Cramer, that not only the "European Union, but most countries in the world, have a 25 percent or greater VAT, value-added tax, on products going into their countries from the United States. So if we impose a 25 percent tariff, all we are doing is treating them exactly as they treat us." VAT (value added tax) is a sales tax which is charged regardless of origin.
Analyst Zachary Karabell claimed that the administration's desire to reject long-standing trade consensus in favor of a more nationalist approach will not succeed: "A set of very public and punitive tariffs will not reverse what has already been transferred and will not do much to address the challenge of China today, which is no longer a manufacturing neophyte."
Peter Navarro, White House Office of Trade and Manufacturing Policy Director, gave a number of the administration's explanations for the tariffs, among them are that they are "purely defensive measures." He claims that the cumulative trillions of dollars Americans transfer overseas as a result of yearly deficits, are then used by those countries to buy America's assets, as opposed to investing that money in the U.S. "If we do as we're doing . . . those trillions of dollars are in the hands of foreigners that they can then use to buy up America."
Our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don't just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.
U.S. Trade Representative Robert Lighthizer, after a seven-month investigation into China and intellectual property, explained that the value of the tariffs imposed was based on U.S. estimates of the actual economic damage caused by China's alleged IP theft and the forced transfer of technology to Chinese companies. In response, Chinese PremierLi Keqiang promised in March 2018 to henceforth protect the rights of foreigners investing in its economy, followed in April by an announcement by China that it would eliminate laws that required global automakers and shipbuilders to work through state-owned partners.
President of ChinaXi Jinping reiterated those pledges, affirming a desire to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property, all central issues in Trump's complaints about their trade imbalance. Trump thanked Xi for his "kind words on tariffs and automobile barriers" and "his enlightenment" on intellectual property and technology transfers. "We will make great progress together!" the president added.
According to a January 14, 2019, article in the Wall Street Journal, despite US-imposed tariffs, in 2018 China’s annual trade surplus was $323.32 billion, a record high. A February 6, 2018, The New York Times reported that in 2017 the trade deficit had also reached a record high.Strong demand for Chinese goods also reflects the difficulty other countries face in competing for the price and quality of Chinese goods, so a small amount of tariffs will not substantially change global demand for Chinese exports, said Park Shui, a professor of economics at the University of Science and Technology in Hong Kong.
Arguments that China unfairly controls imports
It is claimed that China has instituted an array of non-tariff barriers meant that some critical sectors of the Chinese economy remained relatively insulated from international competition. China has controlled imports by having different standards for private, foreign companies than for Chinese State Owned companies:
Lee G. Branstetter, a professor of economics and public policy at Carnegie Mellon University, listed some of the ways that China has misappropriated foreign technology. In a report issued March 22, 2018, the U.S. cited numerous instances of forced technology transfer and the failure of companies and the government to protect U.S. intellectual property from infringement or theft. Soon after the report came out, the U.S. announced plans to impose tariffs on up to $60 billion worth of Chinese exports to the United States and tighten the rules governing Chinese investment in the United States.
Arguments that the WTO sanction mechanism is slow and ineffective
Amid doubts over the costs of U.S. comprehensive strength and leverage, alleged security implications, China's allegedly terrible human rights records, the Clinton administration in 2000 approved China's entry to the World Trade Organization. However, the US claims that China has failed to fulfill its promise for reforms and requirements to be a WTO member, further claiming that flaws in the rules of the current trading system lets China limit imports with high tariffs and discriminatory regulations, subsidize exports with an inexpensive currency and generous cr through state controlled banks, bully foreign investors, pirate western intellectual property, which allegedly gives it trade advantages. The US claims that the WTO for a long time didn't punish China's "cheating".[excessive citations]
The view that China manipulates its currency for its own benefit in trade has been rebutted by US organizations such as Cato Institute trade policy studies fellow Daniel Pearson,National Taxpayers Union Policy and Government Affairs Manager Clark Packard, entrepreneur and Forbes contributor Louis Woodhill, Henry Kaufman Professor of Financial Institutions at Columbia University Charles W. Calomiris, economist Ed Dolan, William L. Clayton Professor of International Economic Affairs at the Fletcher School, Tufts University Michael W. Klein, Harvard University Kennedy School of Government Professor Jeffrey Frankel, Bloomberg columnist William Pesek, Quartz reporter Gwynn Guilford, The Wall Street Journal Digital Network Editor-In-Chief Randall W. Forsyth, United Courier Services, and China Learning Curve.
President Trump has pushed the WTO, which expressly based on open, market-oriented policies and rooted in the principles of non-discrimination, market access, reciprocity, fairness and transparency, to reform, or he may pull the U.S. out as a member. Others, such as White House Council of Economic Advisers Chairman Kevin Hassett, has repeatedly urge the system consider to evict China out of the WTO as: "We never really envisioned that a country would enter the WTO and then behave the way that China has. It's a new thing for the WTO to have a member that is misbehaving so much."[excessive citations]However, on July 21, 2018, the United States proposal against China at the World Trade Organization was rejected by 70 members of the United Nations.
Congress urges real and tough actions against China
Before the Trump Administration took concrete measures against China in late March 2018, Democratic leaders in both chambers of Congress have continuously criticized President Trump as being a total "paper tiger" and doing virtually nothing on trade but study it. They pressed the President to focus more on China rather than allies and take real punishments such as fulfill his own campaign commitments to label China a currency manipulator on his first day in office and stop China from pressuring U.S. tech companies into giving up intellectual property rights. Senate Democratic Leader Chuck Schumer said "China has stolen millions of jobs and trillions of dollars" but "administrations from both parties haven't been strong enough to fight back". Schumer, Senators Ron Wyden, Sherrod Brown and Joe Manchin among others vowed to roll out a China-related trade package that included creating a "trade prosecutor" to supplement the work of the U.S. trade representative. House Democratic Leader Nancy Pelosi said "human rights are also integral to a fair trading relationship in countries like China that exploit prison labor, engage in other unfair labor practices, and stifle free speech and dissent." She also urge Trump must take a strong stand against unfair market barriers.[excessive citations]
Statement by both parties
Big American companies fiercely protect their intellectual property and trade secrets, fearful of giving an edge to rivals. But they have little choice in China—and Washington is looking on with alarm. To gain access to the Chinese market, American companies are being forced to transfer technology, create joint ventures, lower prices and aid homegrown players. Those efforts form the backbone of President Xi Jinping’s ambitious plan to ensure that China's companies, military and government dominate core areas of technology like artificial intelligence and semiconductors.
The Trump administration said the tariffs were necessary to protect intellectual property of U.S. businesses, and to help reduce the U.S. trade deficit with China. China has criticized the U.S. restrictions of some of its sensitive high technology products, their unfair treatments of China's market economy status, and unreasonable trade tariffs.
Zhang Qingli, Vice Chairman of the Committee of the Chinese People's Political Consultative Conference said that "China never wants a trade war with anybody, not to mention the U.S., who has been a long term strategic partner, but we also do not fear such a war. ... The U.S. side has disregarded a consensus with China after multiple rounds of consultations, insisting on waging a trade war against China and continuing to escalate it." While White House Deputy Press Secretary Lindsay Walters said that "The goal of United States trade actions is not to harm China's economy or start a trade war, but to get China to follow through on allowing fair competition and stop their unfair trade practices that have been hurting the American workers for years." Since filing for consultations with the WTO, neither party has agreed on an overall solution, which has led to a continuing trade conflict and more discussions.
Chronology of tariff events
January 22, 2018. President Trump placed a 30% tariff on foreign solar panels, to be reduced to 15% after four years. China, the world leader in solar panel manufacture, decried the tariffs. That same day, tariffs of 20% were placed on washing machines for the first 1.2 million units imported during the year. In 2016, China exported $425 million worth of washers to the United States.
March 1, 2018. President Trump imposed tariffs of 25% on steel and 10% on aluminum. The tariff would have a greater effect on some other countries, including allies such as Canada and South Korea, than China.
April 2, 2018. China responded by imposing tariffs on 128 products it imports from America, including aluminium, airplanes, cars, pork, and soybeans (which have a 25% tariff), as well as fruit, nuts, and steel piping (15%). On April 5, 2018, Trump responded saying that he was considering another round of tariffs on an additional $100 billion of Chinese imports as Beijing retaliates. The next day the World Trade Organization received request from China for consultations on new U.S. tariffs.
President Trump talks trade with the Vice Premier of the People's Republic of China, Liu He, May 2018
May 20, 2018. Chinese officials agreed to "substantially reduce" America's trade deficit with China by committing to "significantly increase" its purchases of American goods. As a result, Treasury SecretarySteven Mnuchin announced that "We are putting the trade war on hold". White House National Trade Council Director Peter Navarro, however, said that there was no "trade war," but that it was a "trade dispute, fair and simple. We lost the trade war long ago."
May 29, 2018. The White House announced that it would impose a 25% tariff on $50 billion of Chinese goods with "industrially significant technology;" the full list of products affected to be announced by June 15, 2018. It also planned to impose investment restrictions and enhanced export controls on certain Chinese individuals and organizations to prevent them from acquiring U.S. technology. China said it would discontinue trade talks with Washington if it imposed trade sanctions."
June 15, 2018. Trump declared that the United States would impose a 25% tariff on $50 billion of Chinese exports. $34 billion would start July 6, 2018, with a further $16 billion to begin at a later date. China's Commerce Ministry accused the United States of launching a trade war and said China would respond in kind with similar tariffs for US imports, starting on July 6, 2018. Three days later, the White House declared that the United States would impose additional 10% tariffs on another $200 billion worth of Chinese imports if China retaliated against these U.S. tariffs. The list of products included in this round of tariffs was released on July 11, 2018, and was set to be implemented within 60 days.
June 19, 2018. China retaliated almost immediately, threatening its own tariffs on $50 billion of U.S. goods, and claimed the United States had "launched a trade war." Import and export markets in a number of nations feared the tariffs would disrupt supply chains which could "ripple around the globe."
July 6, 2018. American tariffs on $34 billion of Chinese goods came into effect. China imposed retaliatory tariffs on US goods of a similar value. The tariffs accounted for 0.1% of the global gross domestic product. On July 10, 2018, U.S. released an initial list of the additional $200 billion of Chinese goods that would be subject to a 10% tariff. China vowed to retaliate with additional tariffs on American goods worth $60 billion annually two days later.
August 8, 2018. The Office of the United States Trade Representative published its finalized list of 279 Chinese goods, worth $16 Billion, to be subject to a 25% tariff from August 23, 2018. in order to safeguard its legitimate rights and interests and the multilateral trading system, China had to make necessary countermeasures, and decided to impose 25% tariffs on us $16 billion of imports from the us, which was implemented in parallel with the us side. on August 23, 2018.
August 14, 2018. China filed a complaint with the World Trade Organization (WTO), claiming that US tariffs on foreign solar panels clash with WTO ruling and have destabilized the international market for solar PV products. China claimed the resulting impact directly harmed China's legitimate trade interests.
August 22, 2018. US Treasury Undersecretary David Malpass and Chinese Commerce Vice-Minister Wang Shouwen met in Washington, D.C. in a bid to reopen negotiations. Meanwhile, on August 23, 2018, the US and China's promised tariffs on $16 billion of goods took effect, and on August 27, 2018, China filed a new WTO complaint against the US regarding the additional tariffs.
September 17, 2018. The US announced its 10% tariff on $200 billion worth of Chinese goods would begin on September 24, 2018, increasing to 25% by the end of the year. They also threatened tariffs on an additional $267 billion worth of imports if China retaliates, which China promptly did on September 18 with 10% tariffs on $60 billion of US imports. So far, China has either imposed or proposed tariffs on $110 billion of U.S. goods, representing most of its imports of American products.
December 1, 2018. The planned increases in tariffs were postponed. The White House stated that both parties will "immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft."
President Trump appointed Trade Representative Robert Lighthizer as lead negotiator to oversee the 90-day negotiation.
The threatened tariff increase on the additional $200 billion in Chinese goods by the US, and the retaliatory increase in tariffs on American goods, was postponed in early December 2018. During a dinner at the 2018 G20 Buenos Aires summit, Donald Trump and Xi Jinping agreed to delay their planned increases in tariffs for 90 days, starting on December 1, to allow time for the two countries to negotiate their trade disputes. According to the Trump Administration, "If at the end of [90 days], the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent." The U.S. Trade Representative's office confirms the hard deadline for China's structural changes is March 1, 2019. If China fails to do reforms which were to be done years ago, the 25% tariffs on $200 billion of Chinese goods will be imposed since 12:01 a.m. Eastern Time Zone on March 2, 2019.
Sarah Huckabee Sanders told the news media that China had agreed to purchase "a very substantial" amount of soy beans and other agricultural, energy, industrial, and other products from the US. Larry Kudlow said that China had agreed to reduce the 40% tariff on cars coming into China from the US, although Beijing had not confirmed that by December 4, 2018. On that date, an article in the state-controlled newspaper Securities Daily said that the Chinese government was considering a reduction in the auto tariff but provided no specifics. A White House statement also said that the two leaders had "agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture".
A Chinese diplomat commented on December 1 that the "two heads of state reached consensus to halt the mutual increase of new tariffs" and that the country would increase its purchases from the US to "gradually ease the imbalance in two-way trade". The official announcement from Beijing did not confirm the plan for such purchases, but said that both leaders were striving for a mutually-beneficial agreement.
On October 17, 2018, the United States announced its withdrawal from the Universal Postal Union, in order to renegotiate international shipping rates for mail and small packages. China had been paying lower rates because it was considered a developing nation; the United States seeks to charge the same rates for all countries. The withdrawal can be rescinded if an agreement is found within one year.
U.S. Executive Branch
U.S. Secretary of Commerce Wilbur Ross meets with Chinese Minister of Industry and Information Technology Miao Wei, Beijing, September 2017
Harry G. Broadman, a former U.S. trade negotiator, has argued the Trump Administration's bilateral approach towards China, particularly one focused on imposing tariffs to bring about a reduction in the merchandise trade balance between China and the U.S., will be self-defeating, if not misdirected. Broadman believes it would be more effective if the U.S. built and led a coalition of major trading partners to press China on a multilateral basis to renegotiate its 2001 accession agreement for membership in the WTO.
New York Fed President John Williams said on December 4, 2018, that he believes the US economy will stay strong in 2019. Williams expects that increases in the interest rates will be necessary to maintain the economy. He stated, “Given this outlook of strong growth, strong labor market and inflation near our goal and taking account all the various risks around the outlook, I do expect further gradual increases in interest rates will best sponsor a sustained economic expansion."
However, America's biggest financial services institutions jpmorgan, according to a report released by the effect of a trade war with China, the U.S. economy may fall into recession in the next two years, the longest ever end of economic growth, and through computer simulation, to October 2020, the United States the possibility of a recession at 60%.
Strong bipartisan pushes for firm and further actions against China
Senate Democratic Leader Chuck Schumer praised President Trump's higher tariffs against China's alleged taking advantage of the U.S. and said "Democrats, Republicans, Americans of every political ideology, every region in the country should support these actions." In the meanwhile, he warns Trump administration not to let China play them and President Trump should not back off his pledges to punish Beijing. Most Democratic senators, including Committee ranking members Bob Menendez (Foreign Relations), Sherrod Brown (Banking), and Ron Wyden (Finance), claimed that Americans confront rampant theft of U.S. intellectual property, forced data storage localization policies, agricultural policies that disadvantage American farmers, dumping shoddy goods, restrictions on market access for U.S. service providers and manufacturers, and mercantilist industrial policies that have cost U.S. workers their jobs. They ask sanction on Chinese companies, such as ZTE, that has allegedly sold sensitive U.S. technologies to Iran and North Korea and repeatedly made false statements. Democrats call on putting American workers, farmers, businesses, innovation and national security ahead of China and remain steadfast in enforcing America's laws for claimed predatory and abusive behaviors. Ahead of the G-20 negotiation, the Senators ask the administration to stand tougher for pushing real meaningful structural reforms in China.[excessive citations]
The Republican Senate Judiciary Committee Chairman Chuck Grassley also condemn the allegedly increasing Chinese espionage and cheating against the U.S. He states China is a more real threat to American manufacturing and high-tech industries, claiming that regarding espionage, FBI Director Christopher A. Wray has said “there's no country that's even close” to China. China is claimed to be responsible for 50~80% of cross-border intellectual property theft worldwide, and over 90% of cyber-enabled economic espionage in the U.S.
House Democratic Leader Nancy Pelosi, a long-time critic of China, supported Trump Administration's new tariffs and stated: U.S. "must take strong, smart and strategic action against China's brazenly unfair trade policies... must do much more to fight for American workers and products... far more is need to confront the full range of China's bad behavior. Beijing's regulatory barriers, localization requirements, labor abuses, anti-competitive policy and many other unfair trade practices require a full and comprehensive response... must show the moral courage to use its economic leverage to not only guarantee free trade for American products in Chinese markets, but also to advance human rights in China and Tibet."
Republican House Ways and Means Committee Chair Kevin Brady said President Trump is right to take a hard line against China's claimed misbehavior, which have allegedly harmed American workers. Republican House Asia-Pacific subcommittee Chair Ted Yoho warned "A brief reduction in the trade deficit will do nothing to solve the main challenges of the trade relationship" and called for “targeted sanctions” on Chinese companies, non-tariff restrictions, and upgraded protection for US and intellectual property innovation. The Democrat ranking member Brad Sherman urged his colleagues to keep position against most favored nation status for China. The Democratic-Pelosi-led House is also considered to back President Trump's trade war against China and could push him to do more.
Markets and Industries
By early July 2018, there were negative and positive results already showing up in the economy as a result of the tariffs, with a number of industries showing employment growth while others were planning on layoffs. Regional commentators noted that consumer products were the most likely to be affected by the tariffs. A timeline of when costs would rise was uncertain as companies had to figure out if they could sustain a tariff hike without passing on the costs to consumers.
In anticipation of tariffs going into effect, stock prices in the U.S. and China sustained significant[vague] losses for four to six weeks prior.[when?] Trade war fears had led to a bear market in China where by late June the total value of the country's stock markets was 20% lower than it had been at the beginning of 2018 when it reached record levels. The Japanese Nikkei also suffered a "three-week pullback". On July 6, when the tariffs went into effect, markets rebounded and rallied due to positive jobs report in the U.S. Asian markets similarly rebounded, ending the day in a high note. According to the Associated Press, the positive reaction to the tariffs in U.S. and Asian markets was because of an end to uncertainty and, according to Investor's Business Daily, because "markets had largely priced in the impact".
Nucor's John Ferriola said that even with the tariffs on steel, the cost of an average $36,000 car would go up about $160, less than 1/2 of 1%, while a can of beer would only cost an extra penny more.
Following announcements of escalation of tariffs by the U.S. and China, representatives of several major U.S. industries expressed their fears of the effects on their businesses. Organizations critical of the intensifying trade war included National Pork Producers Council, American Soybean Association, and Retail Industry Leaders Association. Several mayors representing towns with a heavy reliance on the manufacturing sector also expressed their concerns. In September, a business coalition announced a lobbying campaign called "Tariffs Hurt the Heartland" to protest the proposed tariffs. The tariffs on Chinese steel, aluminium, and certain chemicals contributed to rising fertilizer and agricultural equipment costs in the United States. Despite the trade war however, demand for freight services increased and imports from China into the U.S grew from USD38,230 million to USD50,032 million. Commentators have noted that counter to fears of falling trade, this actually signalled a growth of demand for goods from China.
On June 1, 2018, after similar action by the United States, the European Union launched WTO legal complaints against China's alleged forced ownership-granting and usage of technology that is claimed to discriminate foreign firms and undermine the intellectual property rights of EU companies. They are allegedly forced to establish joint ventures in order to gain access to the Chinese market. The European Commissioner for TradeCecilia Malmström said "We cannot let any country force our companies to surrender this hard-earned knowledge at its border. This is against international rules that we have all agreed upon in the WTO." American, European and Japanese officials have discussed joint strategy and taken actions against unfair competition by China. The 2018 G20 summit concluded the multilateral trading system "is currently falling short of its objectives... necessary reform of the WTO to improve its functioning."
A simulation conducted by the state backed Guangdong University of Foreign Studies' Research Center for International Trade and Economics and the Chinese Academy of Social Sciences' Institute of World Economics and Politics measured the potential implications of a trade war between the United States and China. By using a multi-country global general equilibrium model, the simulations produced numerical values that represent the effects of a US-China trade war. Overall, the results indicate that China "will be significantly hurt by tariff trade war in all indicators, including welfare, gross domestic product (GDP), manufacturing employment and trade." However, it is pointed out that although there will be definite impacts on China, the costs should be maintainable and will not severely damage the Chinese economy. In regard to the United States, the simulation produced results that described, "the US will gain on welfare, GDP and non-manufacturing production, but hurt employment and trade (both export and import)." Since each nation maintains a large economy, their actions not only effect each other but also the entire world. As a result of the trade war, the simulation predicts that the rest of the world will also see impacts within their own economies. For most large and developed nations, they will see positive benefits from a US-China trade war. As trade decreases between the United States and China, trade will presumably increase between other nations as a result. For example, within the rubber industry, both Chinese and international companies are readying the restructure of their supply chain by shifting manufacturing of rubber products from China to neighboring Asian countries, Vietnam and Malaysia. However, smaller nations will see significant negative impacts. For example, "World total welfare, GDP, manufacturing production and employment, export, import, and total trade" are expected to decrease since many of these nations are highly trade dependent.
^As of 2016, the total amount of U.S. imports equaled $2,248,209 million dollars whereas the total imports of China stood at $1,587,921 million dollars. In regard to exports, U.S. exports were $1,450,457 million dollars whereas China exports were $2,097,637 million dollars. China has had a continuous trade surplus with the United States, amounting to $275.81 billion in 2017. Of the trade surplus, 68% of it is derived from the United States alone. While China experienced a trade surplus, the United States was faced with a trade deficit; therefore persuading the Trump Administration to take action.