The Trump administration’s proposed tariffs on steel and aluminum imports will target China, but not the way most observers believe. For the US, the most important bilateral trade issue has nothing to do with the Chinese authorities’ failure to reduce excess steel capacity, as promised, and stop subsidizing exports. .. Trump no doubt sees potential political gains in steel- and aluminum-producing districts and in increasing the pressure on Canada and Mexico as his administration renegotiates the North American Free Trade Agreement. The European Union has announced plans to retaliate against US exports, but in the end the EU may negotiate – and agree to reduce current tariffs on US products that exceed US tariffs on European products.
.. But the real target of the steel and aluminum tariffs is China. The Chinese government has promised for years to reduce excess steel capacity, thereby cutting the surplus output that is sold to the United States at subsidized prices. Chinese policymakers have postponed doing so as a result of domestic pressure to protect China’s own steel and aluminum jobs.
.. Because the tariffs are being levied under a provision of US trade law that applies to national security, rather than dumping or import surges, it will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China and avoiding the risk of a broader trade war.
.. For the US, the most important trade issue with China concerns technology transfers, not Chinese exports of subsidized steel and aluminum.
.. Until a few years ago, the Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology.
.. Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology.
.. The current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry.
These firms “voluntarily” transfer production knowhow because they want access to a market of 1.3 billion people and an economy as large as that of the US.
These firms complain that the requirement of technology transfer is a form of extortion. Moreover, they worry that the Chinese government often delays their market access long enough for domestic firms to use their newly acquired technology to gain market share.
.. The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China’s behavior. Nor can the US threaten to take Chinese technology or require Chinese firms to transfer it to American firms, because the Chinese do not have the kind of leading-edge technology that US firms have.
.. US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers.
Trump considers media personality Larry Kudlow as top White House economic adviser
Media personality Larry Kudlow, a loquacious and energetic advocate of low taxes and free trade, has emerged as a leading candidate to replace Gary Cohn as director of the White House’s National Economic Council
.. Kudlow was an adviser to Trump during the 2016 campaign, working closely with Treasury Secretary Steven Mnuchin on the design of an initial tax plan. But Kudlow, in media appearances in the past month, has been critical of President Trump’s new plan to impose tariffs on steel and aluminum imports
.. Trump’s close relationship with Kudlow — and Kudlow’s experience speaking on television — have bolstered his candidacy for the job.
.. On March 3, Kudlow joined Steve Moore and Arthur Laffer in a column for CNBC.com that was sharply critical of Trump’s proposal to impose the new tariffs.
“Trump should also examine the historical record on tariffs, because they have almost never worked as intended and almost always deliver an unhappy ending,” they wrote.
.. It is unclear if Trump wants his next NEC director to advance an ambitious agenda or spend more time with the media defending the changes that have already taken place, such as tax cuts and efforts to roll back regulations.
Trump Tariffs May Threaten U.S. Auto Jobs, European Executives Warn
Raising duties on imported cars could prove trickier than on steel and aluminum imports
Volkswagen AG , BMW AG and Daimler AG, which makes Mercedes—have built factories in the U.S. and Mexico in recent years that are geared to export to Europe and China, not just to sell to Americans.
The German manufacturers employ around 36,500 Americans at their factories in South Carolina, Alabama and Tennessee. If U.S. exports face retaliatory tariffs and it becomes more difficult or uncompetitive to export cars from the U.S., European auto makers would likely have to shift those jobs to Mexico or bring them back to Europe.
.. Fears of a global trade war is leading Volvo Cars Corp., the Chinese-owned Swedish auto maker, to reconsider the scope of a new plant that it is building near Charleston, S.C
.. “If the factory in South Carolina could not export, it would be half the size. It would not employ 4,000 people anymore but just 2,000,”
.. Steven Armstrong, president of Ford’s European business, dismissed Mr. Trump’s claims that American auto makers were blocked from selling cars in Europe.
“He obviously hasn’t seen our booth this morning,” Mr. Armstrong said on the sidelines of the Geneva Motor Show. “If the product fits the market, consumers will buy it.”
Trump targets European car-makers with big plants in states he won
President Donald Trump, expressing his ire over trade imbalances this weekend, made a peculiar choice: He focused his criticism on two European brands, BMW and Mercedes-Benz, that have significant investments in two of the nation’s most Trump-friendly states.
“Open up the barriers and get rid of your tariffs,” Trump said of the European Union’s trade policies in a wide-ranging and rollicking address in Pennsylvania Saturday. “And if you don’t do that, we’re going to tax Mercedes-Benz, we’re going to tax BMW.”
.. Trump’s latest attacks, meant to stir up populist enthusiasm, could backfire politically if they instead spur fears that jobs in Trump country might be in jeopardy... Trump likely hopes tariffs on European car imports would spur the German companies to make more vehicles in the U.S. But he said the unpredictability of Trump’s trade policies would more likely have the opposite effect... “A countervailing factor would be a reluctance of the Germans to ‘reward’ this behavior, especially if it’s unclear where trade policy is going,” Ikenson told POLITICO. “His unorthodox and sometimes erratic behavior ultimately discourages investment in the United States.”.. “Should we get tariff walls, it would have an impact on jobs in the United States,” BMW CEO Harald Krueger said last week.. “China wins when we fight with Europe,” Graham said. “China wins when the American consumer has higher prices because of tariffs that don’t affect Chinese behavior.”