Trump fires starting gun on technology trade war with China

Washington has kicked off the process of putting tariffs and investment restrictions on Chinese companies, while taking the Middle Kingdom to the World Trade Organization for dispute settlement.
Written by Chris Duckett, Contributor

Technology is front and centre of the looming trade war between Washington and Beijing, as United States President Donald Trump initiated the process of installing tariffs on a number of Chinese products, restricting Chinese investment in "industries and technology deemed important" to US interests, and taking China to the World Trade Organization (WTO) for discriminatory technology licensing practices.

In a Presidential Memorandum signed on Thursday, Trump said an investigation by United States Trade Representative Robert Lighthizer concluded that China uses foreign ownership restrictions to require technology transfer from US companies to Chinese organisations, as well as conducting espionage to acquire intellectual property and confidential business information.

Additionally, the memorandum said China "directs and facilitates" investment and acquisitions of US companies for technology transfer purposes according to Beijing's plans, and lowers the ability of US companies to license technology to Chinese firms at proper market rates.

As a consequence, Trump has directed Lighthizer to publish a list of products to have tariffs imposed upon them within the next 15 days, and to "pursue dispute settlement" at the WTO over China's technology licensing practices. The president has also directed Secretary of the Treasury Steven Mnuchin to address investment concerns.

Also read: Broadcom-Qualcomm went from bad to worse to Trump: The whole sordid saga

"We have a trade deficit, depending on the way you calculate, of $504 billion, now some people would say it is really $375 billion," Trump said on Thursday. "Many different ways of looking at it, but any way you look at it, it is the largest deficit of any country in the history of our world -- it's out of control."

The president claimed intellectual property theft is costing America in the order of hundreds of billions of dollars each year, and the tariffs could hit $60 billion worth of Chinese imports to America.

"We are doing things for this country that should have been done for many, many years -- we've had this abuse by many other countries and groups of countries that were put together in order to take advantage of the United States, and we don't want that to happen, we're not going to let that happen," Trump said.

"Frankly, it's going to make us a much stronger, much richer nation."

Lighthizer added that the US has 44 million workers involved in "high-technology areas" and that technology would be the "the backbone of the future" for the American economy.

On Friday, China announced a list of US goods including pork, apples, and steel pipe that it says may be hit with higher import duties in response to Trump's tariff hike on steel and aluminium.

The Chinese Commerce Ministry called on Washington to negotiate a settlement as soon as possible, but set no deadline.

A ministry statement said the higher US tariffs "seriously undermine" the global trading system.

"The Chinese side urges the US side to resolve the concerns of the Chinese side as soon as possible," the ministry said. It appealed for dialogue "to avoid damage to overall Chinese-US cooperation".

Goods targeted for possible higher Chinese tariffs include wine, apples, and ethanol, which would hit agricultural areas where voters supported Trump in the 2016 presidential election.

Read more: Paranoia will destroy us: Why Chinese tech isn't spying on Americans

The ministry said China bought about $1 billion worth of those goods last year. They would be hit with a 15 percent tariff increase, mirroring the US duty hike of 15 percent on aluminium.

A second group of products targeted for a possible 25 percent tariff, mirroring the higher American charge on steel, includes pork and aluminium scrap, according to the ministry.

In September 2015, the two countries signed an agreement ostensibly to prevent economic espionage from being conducted online, which was subsequently claimed to be breached the very next day.

Over recent months, the United States has stepped up its rhetoric against China, particularly in the realm of technology.

In February, the heads of the CIA, FBI, NSA, and the director of national intelligence to the Senate Intelligence Committee recommended that Americans not use products from Huawei and ZTE.

Earlier this month, Trump issued an order sinking Broadcom's proposed takeover of Qualcomm, saying there was "credible evidence" the deal would hurt the national security of the United States.

At the time, the Committee on Foreign Investment in the United States said that if Broadcom succeeded in its plans, it could weaken Qualcomm and allow China to have greater influence over standards such as 5G.

With AAP

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