Senior US officials are due to travel to Beijing on Tuesday to hold talks on resolving an escalating trade dispute and they say they are hopeful of finding a solution but warn the issues are complex.
If they fail to agree on a course of action to protect intellectual property rights from depredation, US punitive tariffs on US$50 billion in Chinese goods are set to take effect May 22 and are certain to set off a chain of retaliation that could spill over into the global economy.
“I’m always hoping but not always hopeful,” US Trade Representative Robert Lighthizer said Tuesday. “It’s a big, big challenge.”
President Donald Trump announced the punitive action against China in late March for what the administration says is rampant theft of US technology and know-how.
Lighthizer said the problems are grave since practices such as forced technology transfers and even outright theft undermines the US ability to position itself for the economy of the future.
“They are using their own law to get technology without paying for it,” he told a US-China business conference.
He is due to travel to China later Tuesday with Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and White House economic advisers Peter Navarro and Larry Kudlow to meet with their counterparts on Thursday and Friday.
US officials have highlighted Beijing’s “China 2025” industrial development plan as a source of concern — Ross called it “frightening” — since they say it is map for dominating key high tech industries.
Lighthizer said the country had already followed that path with steel and aluminum — products now subject to steep US tariffs — as well as semiconductors and “now they want to do it in all these areas, many of which will drive the economy.”
“The whole relationship has a lot of negatives,” he said, but “the most sinful is this issue of intellectual property.”
In comments earlier on Tuesday, Ross declined to say what would be sufficient to satisfy the White House but stressed it was time for action on the trade deficit, which he described as “too big, too chronic and too inspired by evil practices.”
Still, “I wouldn’t be going all the way over there if I didn’t think there was some hope,” he said in an interview with CNBC.
Economists have faulted the administration’s focus on reducing trade deficits with specific countries, since it is not a good measure of the benefits of the relationship.
But Lighthizer said Trump was right that “deficits do matter,” adding that the imbalance with China was “completely lopsided,” which made it fair to ask if their policies contributed to the increase.
The US deficit in goods with China last year was US$375 billion, compared to just US$83 billion in 2000, before the country joined the World Trade Organization.
The Trump administration’s aggressive trade strategy has fueled concerns the exchange of reprisals would harm economies just starting to find firmer footing after years of sluggish growth.
China has promised to retaliate with tariffs on US$50 billion in US goods, prompting Trump to boost the US threat by another US$100 billion.
US manufacturers over the past two months have reported sharp increases in prices of steel and aluminum as a result of the biting tariffs also imposed in March, and the EU also has threatened retaliation against those duties if their exemption expires on June 1.
Ross downplayed the concerns about retaliation on the US economy, saying, “We are the ones in the deficit position. That means they have more to lose at the end of the day.”
Thomas Donohue, president of the US Chamber of Commerce, on Tuesday urged the administration to find a solution “without inflicting collateral damage on business and consumers.”
He called for Beijing to move “aggressively” to reform their economy but called on Washington “to work collectively…to adequately address China’s unfair trade practices.”