June 19, 2019
Latest News

On China, President Trump leads a coalition of the unwilling

 A exhibitor displays the Google Cloud and Huawei Cloud logos during the Cloud Expo Asia 2019 in Hong Kong, China, May  22, 2019. EPA-EFE/JEROME FAVRE

A exhibitor displays the Google Cloud and Huawei Cloud logos during the Cloud Expo Asia 2019 in Hong Kong, China, May 22, 2019. EPA-EFE/JEROME FAVRE

By Greg Ip

Washington, May 22 (efe-epa).- After two years of treating adversaries and allies alike as trade villains, United States President Donald Trump pivoted last week, according to a Dow Jones Newswires report made available to EFE on Wednesday.

With China edging away from commitments to change its ways, Trump sharply ratcheted up tariffs and banned United States companies from doing business with Huawei Technologies Co.

Separately, he lifted tariffs on metal imports from Canada and Mexico while delaying for six months tariffs on autos from the European Union and Japan.

Meanwhile, US, European and Japanese trade officials are to meet this week on joint efforts to curb Chinese subsidies.

But before heralding a united front, let's remember how Trump got here: not by working with allies, but by stiff-arming them.

His confrontation with China today remains a largely unilateral affair, using American laws and leverage to address American grievances and priorities.

He is dialing back tariffs on allies not out of some change of heart but because they have consumed time, energy and goodwill with paltry and arguably perverse results.

The outcome is that far from leading a coalition of the willing against China, he is leading a coalition of the ambivalent, sullen and resentful. That is a fragile foundation for global economic cooperation.

Indeed, Trump's decision to delay auto tariffs did little to reassure allies, given that he also agrees with a Commerce Department report that car imports threaten US national security.

German officials are resigned to him raising tariffs once he has secured a deal with China, which would almost certainly bring EU retaliation. Japan's Toyota Motor Corp., not known for rocking the boat, said Trump's "proclamation sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued."

On China, the US and its allies are of one mind: China, they say, discriminates against foreign products, companies and investment and pursues their intellectual property via commerce, coercion and espionage.

The European Union's executive arm earlier this year labeled China an "economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance."

Yet the US has regularly spurned opportunities to cooperate. Trump pulled the US out of the 12-nation Trans-Pacific Partnership, designed as a rules-based, free-market alternative to China's state capitalism. He used a US law, Section 301 of the Trade Act of 1974, to hit China with tariffs over its trade barriers and is pursuing remedies that may come at others' expense, for example forcing China to shift purchases of energy and agricultural products to American producers.

Should a deal emerge, it will be enforced bilaterally, bypassing the World Trade Organization.

The US treats Huawei as a national security concern, but in practice, links that risk to the company's commercial reach given the close ties between Chinese companies and the state.

The US has deployed a broad range of domestic laws to punish the company, such as for violating sanctions on Iran. Washington has threatened to withhold intelligence from allies that don't ban Huawei equipment from fifth-generation mobile networks.

Last week, the Trump administration barred US companies from doing business with Huawei, though on Monday offered a 90-day reprieve.

Other countries, drawing a sharper line between China's commercial and security threat, have been less inclined to ostracize Huawei altogether.

French President Emmanuel Macron said: "Our perspective is not to block Huawei or any company,” he said, adding, “Launching now a technological war or a trade war vis-à-vis any other country is not appropriate."

The administration doesn't need its allies' buy-in: It just needs to scare foreign companies that do business in the US into observing its sanctions or risk devastating penalties.

Simon Evenett, head of Global Trade Alert, a trade watchdog group, notes Britain has indicated it won't ban Huawei, yet Britain's BT Telecom and Vodafone Group have largely shunned Huawei in their 5G networks anyway.

Nor would a more cooperative US necessarily have achieved more, Dow Jones added in a report made available to EFE.

All countries pursue their own interest no matter who's in the White House.

Japan, South Korea and Canada are virtually bound by geography and history to follow the US on strategic questions.

Conversely, Germany is forging ahead with a gas pipeline to Russia that both President Barack Obama and Trump oppose, while Italy's populist coalition has both welcomed Huawei and China's Belt and Road Initiative.

Still, sanctions will be less effective with the US acting alone. German chip maker Infineon Technologies AG halted deliveries to Huawei of some US-made components, but not products originating elsewhere.

Instead of making US allies more amenable to US demands, tariffs have done the opposite. Canada and Mexico had ample incentive to appease the US in a renegotiated North American Free Trade Agreement.

When the US hit them with tariffs on steel and aluminum, both retaliated. US steel companies claim to be adding 12,800 jobs, but Gary Hufbauer and Euijin Jung of the Peterson Institute for International Economics say higher steel prices cost American steel consumers $11.5 billion - or $900,000 to protect one steel job.

Once those costs plus foreign retaliation are factored in, the tariffs have likely been a net negative, and provoked howls of protest at home and abroad. Chuck Grassley, the Iowa Republican who chairs the Senate Finance Committee, bluntly told Trump the new Nafta was "dead" unless tariffs were lifted.

The lesson is that Trump isn't the only one who has leverage: so do Congress and foreign countries prepared to retaliate. Better they use that leverage together. Revamping the WTO to change China's behavior would be a good place to start.


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