US Investigation Into Trade Practices

The Foreign Ministry of China is criticizing the investigation opened by the United States this week into the trade practices of several countries, referring to it as a “pretext for political manipulation.”

The Investigation Into Trade Practices

After the U.S. Supreme Court struck down tariffs imposed by President Donald J. Trump, Trade Representative Jamieson Greer announced an investigation on Wednesday into “excess capacity and production in manufacturing sectors” in countries including China, Mexico, and the European Union.

Trump and his administration are seeking to replace revenue loss from the Supreme Court ruling against the sweeping tariffs by employing different laws to establish new tariffs.

The administration is conducting investigations under Section 301 of the Trade Act of 1974, which could lead to new import taxes, but Trade Representative Jamieson Greer said on Wednesday he did not want to prejudge the outcome.

“The policy remains the same – the tools may change depending on, you know, the vagaries of courts and other things,” said Greer, emphasizing the goal is to protect American jobs.

The overturned tariffs have led to new agreements with U.S. trade partners, and it is not yet clear how new import taxes could impact those frameworks. Greer says the agreements stand on their own, separate from the investigation.

The goal of the investigation is to examine excess industrial capacity and government backing that may give foreign companies an advantage over U.S. companies.

The entities subject to the investigation include the European Union, China, Switzerland, Singapore, Indonesia, Norway, Cambodia, Malaysia, South Korea, Thailand, Taiwan, Vietnam, Mexico, Bangladesh, India, and Japan. The investigation is looking for persistent trade surpluses with the U.S. and policies such as subsidies and the suppression of workers’ wages, and other factors, according to PBS.

On Thursday, “We oppose any form of unilateral tariff measures. The so-called issue of ‘China’s overcapacity’ does not really exist and should not be used as a pretext for political manipulation.”

This comes weeks before Trump and Chinese President Xi Jinping are scheduled to meet for a summit.

Additionally, lawmakers in Beijing approved a plan for economic growth, continuing some of the practices that have upset some of its partners.

5-Year Economic Plan for China

On Thursday, Chinese lawmakers approved a five-year social and economic blueprint, which includes policies around technological self-reliance and industrial manufacturing.

The plan does not specifically mention the United States; it focuses on “managing what Beijing calls its ‘great-power competition’ with Washington,” according to Yu Jie, a senior research fellow on China at London-based think tank, Chatham House.

Key Takeaways From China’s Blueprint

China wants to make “substantial improvements” in self-reliance and strengthen its science and technology sectors.

The country has relied on foreign suppliers of high-end technology, such as high-end semiconductors and aircraft engines, according to Yu. After the U.S. restricted the sale of high-end semiconductors and advanced technology to Chinese firms, the country hardened its resolve for independence. It is set to increase research and development spending by over seven percent annually.

The country wants to lead the world in the areas of aerospace, semiconductors, biomedicine, robotics, quantum technology, and low-altitude economy, ranging from drones to flying taxis.

In the past, American and European business groups in China raised concerns that there would not be many opportunities for them. In an editorial, the Chinese official news agency, Xinhua, stated, “Tech sovereignty is not about isolation.”

The country wants to manufacture its innovations, capitalizing on its breakthroughs in artificial intelligence and robotics to build a “modern industrial system with advanced manufacturing as its backbone.”

The blueprint does not address the issue of “involution,” where competition among manufacturers leads to price wars and oversupply, which impacts profits and increases trade friction.

Chinese manufacturers have allegedly dumped their excess inventory abroad, undercutting key industries of their trade partners.

The five-year plan calls for the strengthening of competitive advantages in rare earths and other strategic minerals. Officials used that advantage as leverage to pressure President Donald J. Trump to back down on triple-digit tariffs on exports last year.

China has been called on by leaders in the U.S. and Europe to resolve its overcapacity issue through the revival of domestic consumption.

“They want China to actually export less and import more, encourage local consumption, increase local wages so they can sell more to China,” says Wang Dan, China director of Eurasia Group.

Consumption is listed in the blueprint as a key task; however, details on how to address the gap are not included.

Sources:

NPR: China slams Trump’s trade investigation, as it approves a 5-year economic plan
PBS: Trump administration starts new process to try to replace tariffs struck down by Supreme Court

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