Economic war with China: The risks
President Donald Trump wants to pick an economic fight with China, and there are few people standing in his way.
His top trade adviser, Peter Navarro, wrote a book called "Death by China." His new economic adviser, Larry Kudlow, says he believes in free trade but that China "has not played by the rules" and "has earned a tough response." The top Democrat in the Senate, Chuck Schumer, says he wants to let China know "we mean business."
The Trump administration poked China in January with tariffs on imported solar panels. Next came steel and aluminum tariffs, prompting outcry from trading partners, even though those tariffs have a small impact on China itself.
Now, Mr. Trump is reportedly considering tariffs on up to $60 billion of Chinese goods following an investigation into China's trade practices.
Tariffs under consideration could cover a wide range of imported goods: electronics; apparel and footwear; transportation equipment tied to planes, ships and rail. The administration could also put limits on Chinese investment in the U.S. and restrict visas for students. Under Mr. Trump, it's also become increasingly difficult for Chinese companies to buy U.S.-based firms.
Despite the bipartisan support in Washington for getting tough with China on trade, corporate America is worried. A coalition of 45 trade associations on Sunday published a joint letter addressed to Mr. Trump urging him not to impose tariffs against China.
"The imposition of sweeping tariffs would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports; and raising costs for businesses and consumers," wrote the groups, which represent some of the country's biggest companies in technology, telecommunications, retail, consumer goods and other industries. "The administration should not respond to unfair Chinese practices and policies by imposing tariffs or other measures that will harm U.S. companies, workers, farmers, ranchers, consumers and investors."
The charge against China
China is America's largest trading partner, and Mr. Trump points to America's trade deficit of about $375 billion. He has publicly called on China to shave $100 billion off that figure.
Trump also said China steals "intellectual property" from American companies trying to do business there. That includes patents, trademarks and copyrights for everything from aviation equipment to software. Some U.S. companies have long complained that China forces them to transfer the technology to Chinese-owned companies as a condition of doing business there
Estimates of IP theft range from $225 billion to $600 billion, according to testimony last year from Richard Ellings, the president of the National Bureau of Asian Research. Ellings spoke on behalf of the private Commission on the Theft of American Intellectual Property set up to investigate China's practices.
The U.S. Trade Representative began its investigation in August under section 301 of the 1974 U.S. Trade Act, and its findings could be released in the next few weeks.
Tariffs on Chinese imports: Higher prices, fewer jobs?
Put a tariff on something, and its price goes up. You'll likely pay more for everything from the clothes and shoes to the TV in your living room and your smartphone.
"We're always concerned whenever tariffs are used as a penalty against imports," said John Gould, the vice president of supply chain and customs policy at the National Retail Federation. "Tariffs are passed along and are essentially taxes paid by the U.S. consumer."
American jobs could also suffer as U.S. firms faced with higher prices are forced to cut costs.
For example: The solar panel tariff has raised the cost of a typical home solar installation by $500 to $1,000 and made the typical utility-scale solar farm about 10 percent more expensive, according to GTM Research.
Several solar utilities have already called off planned projects. SunPower, a San Jose, California-based solar company, put on hold a planned $20 million expansion while it seeks an exemption from the tariffs and said it would lay off 150 to 250 people.
Risk of retaliation
"China has signaled consistently that it will take an eye-for-an-eye approach to responding to any new tariffs," Ryan Hass, a fellow at Brookings Institution's John L. Thornton China Center and the Center for East Asia Policy Studies, said in an email.
China has a number of ways to retaliate. It could stop buying from U.S. companies and farmers, and squeeze U.S. firms doing business in China with tougher regulations.
According to Hass, China could frame the U.S. as "the irresponsible and disruptive actor and China as the defender of globalization" and even slow cooperation in political areas, "including North Korea."
Another risk: China held the most in U.S. debt at the end of 2017, according to the U.S. Treasury, at $1.18 trillion.
Fallout from the steel and aluminum tariffs may mean the U.S. has less international support to go after China.
North American Free Trade Agreement negotiations with Mexico and Canada are more tense even as Mr. Trump granted them an exemption. The E.U. is now seeking its own exemption while threatening retaliation.
Business leaders acknowledge the issues in trading with China, but worry about the repercussions of taking it on via tariffs.
"The administration is right to focus on the negative economic impact of China's industrial policies and unfair trade practices, but the U.S. Chamber would strongly disagree with a decision to impose sweeping tariffs," Thomas J. Donohue, CEO of the U.S. Chamber of Commerce, said in a statement posted on the group's website. "Tariffs could lead to a destructive trade war with serious consequences for U.S. economic growth and job creation."
The trade groups lobbying President Trump to bypass tariffs instead want the U.S. to muster international pressure on China. In their March 18 letter, they urge the White House to work with "like-minded partners" to address concerns with China's trade and investment policies, while stopping short of suggesting specific measures.
