US should meet China halfway to end trade spat

Having already announced plans to impose tariffs targeting a range of Chinese imports, the Trump administration is apparently also considering a crackdown on Chinese investments in the United States. According to reports, Treasury Department officials are working on plans to identify technology sectors, such as semiconductors and 5G wireless communications, in which Chinese companies would be banned from investing.

Although the plans have not been finalized yet, Commerce Secretary Wilbur Ross said on Tuesday “there will be limitations on foreign investment”, and pending legislation in the Senate and House of Representatives to bulk up the Committee on Foreign Investment in the US, which reviews foreign takeovers on a caseby-case basis, Trump will take “other action”.

Bloomberg reported on Wednesday that one of the options being considered is the use of the International Emergency Economic Powers Act, enacted in 1977, which enables the US president to regulate commerce in response to an “unusual and exceptional threat”.

While these proposed new curbs on Chinese investments in the US are being touted as part of the Trump administration’s punishments for what it alleges are China’s violations of US intellectual property rights, by broadening the scope of reviews in this way it is implementing its national security strategy to protect “critical” technologies, such as microchips and next-generation wireless technology, in which the US sees China as its main rival and thus a “threat”.

Trade frictions are inevitable between the world’s two largest economies, and “some issues will not be solved overnight”, as Premier Li Keqiang informed a visiting US Congress delegation led by Senator Steve Daines on Tuesday. But by looking at trade as a zero-sum game in this way, the Trump administration is disregarding the highly complementary nature of the two economies and endangering their cooperation, which has been continuously expanding, to the benefit of themselves and the rest of the world.

Although China is willing to work toward a solution through dialogue and consultation, it is also “fully prepared with countermeasures”, as Li informed his guests. If the trade conflict with the US continues to escalate, China will be left with no option but to take more measures to defend its interests.

China could consider taking reciprocal measures against US imports of agricultural products besides soybeans, as well as aircraft, automobiles and semiconductors.

And should the Trump administration further obstruct Chinese investments in the US, even tougher measures such as restrictions on imports of US services and similar investment reviews would likely be on the table.