The US-China trade relationship may be in jeopardy if Donald Trump continues to politicize trade. This statement was made recently by a Xinhua News Agency. The US president has requested a review of China’s intellectual property practices. He feels that part of the US trade deficit with China is due to Chinese companies copying American ideas and products. They then sell these products in the US at reduced prices or sell them in China in competition with US exports.
While a review of this kind may take several months to complete, it could result in sanctions or tariffs been taken against Chinese firms to protect the US. This has been a concern for the USA before the Trump administration. Online piracy is another issue the US has with China.
So what if a review supports the US claims? It seems likely that it will. Even now, American companies are complaining about certain requirements in order to sell in the Chinese market. Among these are having to reveal intellectual property and to form partnerships with local Chinese businesses.
The cost to the US of pirated software and counterfeit goods could be between $225 billion and $600 billion. It’s not just the US that is being annoyed with this. Japan, the EU, Germany and Canada have all expressed discontent at what the Chinese are doing. So what issues would arise should President Trump take ‘tough action’ against China regarding this problem? It is possible that Trump would impose tariffs and other restriction, in which case China would likely retaliate.
One issue is that the Chinese know the US is concerned about this issue. Donald Trump is known to shoot from the hip, and a failure to do so now may be regarded by China as a sign of weakness. There has already been a review on China’s intellectual property ‘theft’ this year. They will think – Why does the US need another one?
That’s a good question. Why just another review rather than “tough action?” The US-China trade relationship may appear to be in trouble, although it may be just a temporary hiccup. China is still keen to trade with the US and maintain favorable trade and political associations. The US seems keen to trade with China but wants the trade deficit to start narrowing. Both should be possible should common sense prevail.
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