All About Imports: Chinese President Tries to Mellow Blossoming Trade War With U.S.

“Paramount Leader” and Chinese President Xi Jinping clearly hopes to defuse China’s trade situation with the United States after Donald Trump launched an aggressive tariff hike on metals last month. The People’s Republic has already filed a complaint with the World Trade Organization alleging Trump’s decision to impose additional duties of 25 percent on steel and 10 percent aluminum violate international trade rules.

It’s also requesting 60 days of consultations with the United States to resolve the dispute.

There’s also an olive branch on the table. Xi has promised to cut auto import taxes and improve intellectual property protections in a bid to bolster foreign exports and ease tensions before the U.S. and China enter into a full-blown trade war. Meanwhile, the White House is threatening to increase duties on $50 billion worth of Chinese goods in response to claims that China essentially bullies foreign companies to hand over technology in order to sell it inside the country.

Trump’s hardball approach to Chinese trade has been polarizing, but Xi’s initial response shows some promise that the tactic wasn’t for nothing. While the United States gets the vast majority of its steel from elsewhere, China remains the world’s largest steel exporter by a huge margin and the tariffs set a scary precedent. In addition to the increased duties on Chinese goods, President Xi seems prepared to nip this tiff in the bud before things get any worse.

Speaking to Chinese and foreign businesspeople at the Boao Forum for Asia, Xi didn’t specifically mention Trump but did say Beijing will lower tariffs on auto imports (currently set at 25 percent) this year and ease restrictions on foreign ownership in the auto industry “as soon as possible.”

Right now, China mandates that any outside manufacturer hoping to build vehicles inside its borders (or sell at a meaningful volume) enter into a joint venture. Critics claim this is tantamount to handing proprietary technologies over to potential competitors, since the law dictates foreign ownership cannot exceed 50 percent. While ruling primarily affects automakers, it is by no means limited to them. Many have argued the joint venture laws are part of the ruling Communist Party’s plan to create home-grown global competitors in everything from robotics to medicine.

Whether or not it’s true, it does allow Chinese businesses to benefit from foreign investment in a big way, opening up the possibility of sharing advanced technologies they wouldn’t have had access to otherwise. Still, while Xi said the automotive industry can expect fewer restrictions on foreign ownership, he did not specify by how much or when.

Jake Parker, vice president for China operations for the U.S.-China Business Council, told the Associated Press he welcomed the announcement, but expressed hope for additional steps — such as ending requirements for joint ventures and technology licensing altogether.

“Ultimately, U.S. industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the U.S. business community,” Parker explained.

Xi also reiterated his earlier promise that China would expand imports and narrow its widening trade surplus. The country’s overall exports increased 11 percent last year to over $423 billion in goods — and roughly two thirds of those items went straight to America.

[Image: U.K. Foreign and Commonwealth Office/ Flickr ( CC BY 2.0)]