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2018/04/04
Market Insight - China / US - towards a new paradigm in the relations between the two superpowers?

Over the past few weeks, much has been written about the various protectionist measures announced by Donald Trump. Further to the import taxes on solar panels and washing machines, duties on steel and aluminium have also been announced. On 22 March, President Trump signed a presidential memorandum targeting China’s “economic aggression” under article 301 of the 1974 trade law, introducing punitive measures on USD 60 billion of imports from China, i.e. approximately 12% of the USD 506 billion Chinese imports to the US in 2017. The US administration has justified these measures as compensation for alleged violations of intellectual property. Washington has notably accused the co-enterprise system imposed by Beijing on American companies. In exchange for access to the Chinese market, US companies are obliged to share part of their technological knowhow with local partners. The US administration has 15 days after the signature of the memorandum to present the official list of products and tariffs concerned, followed by a 30-day period during which US industrial groups can state any objections.

Confirming the protectionist stance adopted by the US administration, President Trump has also tasked the United States Trade Representative Robert Lighthizer to use WTO litigation processes to attack China’s discriminatory licensing practices. Lastly, Donald Trump has asked the US Treasury to draw up investment restrictions within 60 days aiming to prevent companies controlled by China from acquiring sensitive American tech firms and groups in other strategic sectors. In other terms the US administration is relying on the Committee on Foreign Investment in the United States (CFIUS) to block takeover bids on US companies, as demonstrated by the recent blocking of the hostile bid on Qualcomm by the Singapore-based group Broadcom.

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