The trade war between the US and China has begun. On March 22, US President Donald Trump signed a presidential memorandum on counteracting “China’s economic aggression,” announcing a US$60 billion punitive tariff scheme on as many as 1,300 Chinese products, following an investigation based on Section 301 of the US’ 1962 Trade Expansion Act.
Beijing hit back, announcing a US$30 billion punitive tariff scheme on US products. More will follow.
In addition to lowering the US trade deficit with China, other more important and fundamental factors lie behind the US move.
A trade war is a link in the Trump administration’s national security strategy. The economy is part of the US’ national security and trade policy is used to counteract China’s economic aggression. The Trump administration has on several occasions accused China of stealing US intellectual property and criticized it for forcing US companies in China to transfer technology to China.
Chinese Premier Li Keqiang (李克強) has pledged in a government work report to protect the intellectual property rights of foreign businesses in China, but the US considers that mere lip service and continues to ban the export of high-tech products to China.
The Trump administration is considering using the International Emergency Economic Powers Act to block Chinese investments in sensitive US technology industries such as semiconductors and 5G wireless communications.
Best Buy, the biggest electronic goods retailer in the US, is to stop selling Huawei mobile phones, as the company has been accused of violating US intellectual property rights, and the two biggest telecommunications companies, AT&T and Verizon, have abandoned plans to cooperate with Huawei due to the company’s past links to the People’s Liberation Army.
The Trump administration’s main aim is to revitalize the US’ manufacturing industry. This is not only a trade war, the core goal is to strike at “Made in China 2025,” Chinese President Xi Jinping’s (習近平) big plan to upgrade China’s manufacturing sector to make the nation a major manufacturing power by 2025.
US Trade Representative Robert Lighthizer said in a US Senate hearing that the real reason for the Section 301 investigation was that “Made in China 2025” is “bad for America” and that China must not be allowed to have its way.
US government officials also think that because China is the world’s second-largest economy and the largest manufacturing country in the world — from steel and cement to notebook computers — it has made great advances and can no longer be treated as one of the world’s poor countries.
Furthermore, the problem is that the central, provincial and city governments in China work together with state-owned banks to initiate the construction of factories, in particular those that manufacture storage chips.
China’s manufacturing sector is basically a “national team” sweeping across and merging with companies in the international manufacturing sector.
Of course the Trump administration will not just stand by doing nothing.
Beijing must hit back because the US trade sanctions have hit directly at the image of Xi as a mighty leader following the Chinese Communist Party’s (CCP) 19th National Congress in October last year.
Xi’s Chinese dream is to ensure China a leading position on the international stage comparable to the US’ position over the past several decades and to bring about the revival of the Chinese people.
“Made in China 2025” is the just the framework. By 2035, the goal is to surpass the German and Japanese manufacturing sectors.
The implementation of this strategy requires national resources and not stopping at anything to obtain the intellectual property rights and technological secrets of advanced nations.
Experts believe that Trump’s trade sanctions will be a serious blow to China’s economy, that they might have an effect on Emperor Xi’s Chinese dream of building a moderately prosperous society, a wealthy state and a strong military, and that they could shake up Chinese politics in unpredictable ways.
In the past, the Chinese government routinely used the public relations companies of big US businesses and pro-China politicians like Henry Kissinger and those if his ilk to lobby Washington and block measures aimed at punishing Chinese businesses in exchange for smaller concessions. This trick does not work anymore.
Trump’s core idea is to “Make America Great Again.” Since taking office, he has encouraged manufacturing companies to return to the US in the hope that this will revitalize the US economy.
Trump and his national security team have clearly decided that the CCP regime is the American people’s biggest threat and greatest enemy.
Parris Chang is president of the Taiwan Institute for Political, Economic and Strategic Studies, a former deputy secretary-general of the National Security Council and professor emeritus of political science at Pennsylvania State University.
Translated by Perry Svensson
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