White House will announce tariffs cracking down on Chinese theft of intellectual property

The goal is to structure the tariffs to inflict maximum harm upon China and try to limit the effect on U.S. consumers. 

By Kayla Tausche and Jacob Pramuk

The White House plans to announce a package of tariffs Thursday penalizing China for intellectual property theft.
"Tomorrow the President will announce the actions he has decided to take based on USTR's 301 investigation into China's state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property," principal deputy press secretary Raj Shah said in a statement Wednesday.
He refers to Section 301, the authority by which the U.S. can take action against countries for violations of trade agreements or unfair practices.
The measures to be unveiled will not include restrictions on Chinese investment in the U.S. or student visas, sources told CNBC.
President Donald Trump will be briefed again in two weeks to consider more actions based on the effects of the first phase, said the sources, who declined to be named. 

Trump worries the measures could hit American universities too hard, according to the sources.
Both the timing of the announcement and scope of the tariffs are in flux. 

The president has pushed for tariffs on $60 billion in goods. 

But by law, the penalties must be limited to the amount of harm the U.S. trade representative finds the unfair trade practices have done to the U.S. economy.
The U.S. trade representative launched the investigation in August. 

A USTR official declined to detail the forthcoming decision but sought to justify tariffs by noting that during the last year, China passed up multiple opportunities to offer its own solutions to the issue and repair its bilateral relations with the U.S., including during Trump's visit to Beijing in November.
"Certainly by November, the background was such that [Chinese] policymakers had every reason to know the types of concerns the administration had raised," the official told reporters. 

"The administration has not been satisfied with the type of responses we've been getting from China."
On Capitol Hill on Wednesday, the top U.S. trade official, Robert Lighthizer, said Trump will make the final decision. 

Lighthizer said the policy goal is to structure the tariffs to inflict maximum harm upon China and try to limit the effect on U.S. consumers.

Retaliation from China — notably on U.S. agricultural exports — would be inevitable, he added.
"We are gaming out what would happen," Lighthizer told the House Ways & Means Committee. 

"We can't be in a position where we take no action because of retaliation. That's how you end up having an $800 billion trade deficit."
A USTR official said the agency consulted multiple departments and executive branch divisions — Commerce, Treasury, Agriculture, State, Defense, the National Security Council and the National Economic Council — to assess how China might retaliate.
Retaliation has the potential to spook financial markets. 

Federal Reserve Chairman Jerome Powell said Wednesday that regional business leaders have begun citing the effect of tariffs as a potential risk to economic growth. 

Multinational companies worry they'll lose access to or see costs rise steeply in China, which would have a ripple effect on U.S. employment.

The actions against China will mark the latest Trump administration move to crack down on unfair trade practices.

The White House recently announced tariffs on steel and aluminum imports.
The administration's decision on metals tariffs initially rattled financial markets and sparked backlash from free-trade Republicans. 

The White House later said it wanted only targeted tariffs, after initially suggesting they could apply to every country.

"You have to punch a bully in the face"

White House plans China trade crackdown Thursday

By ADAM BEHSUDI and ANDREW RESTUCCIA
President Donald Trump is slated to outline the results of U.S. Trade Representative Robert Lighthizer's investigation into allegations that China violates U.S. intellectual property rights by forcing American companies to transfer valuable technology to Beijing.

The White House is preparing to announce on Thursday a plan to eventually hit China with tariffs and other trade restrictions, according to two administration officials.
President Donald Trump is slated to outline the results of U.S. Trade Representative Robert Lighthizer's investigation into allegations that China violates U.S. intellectual property rights by forcing American companies to transfer valuable technology to Beijing.
Lighthizer’s office has determined that the United States loses at least $30 billion a year to China’s forced technology transfers. 

As POLITICO reported last week, the administration is weighing a package of tariffs equivalent to that amount of Chinese imports or more.
Trump’s senior advisers have been debating which remedies to impose in response to the investigation for months, and they have drafted proposals for tariffs, investment restrictions and even visa limits aimed at China.
But it’s unclear whether the president will unveil specific retaliatory measures Thursday. 

People familiar with the internal debate said there are still ongoing discussions about exactly which actions the administration should take. 

Trump could instead simply instruct key agencies to finalize the proposals in the coming weeks or months.
The timing of the Thursday announcement could slip, especially if a snowstorm shuts down much of Washington midweek. 

The White House declined to comment Tuesday.
The administration is seeking to target goods that are “meaningful to China,” especially products and technology Beijing is seeking to boost through the Made in China 2025 initiative aimed at growing its high-tech sectors, an administration official said.
Two sources briefed on the administration’s planning said the White House is considering imposing tariffs on between $30 billion and $50 billion in Chinese imports. 

Those goods would be hit with one tariff rate across the board — with the intention of blocking most of those imports from entering the U.S. market, the sources said. 

But administration officials said the final numbers are still in flux.
The U.S. trade actions might eventually bring China to the table to talk about American concerns with Beijing’s industrial overcapacity, state subsidies and lack of market access for U.S. companies.
Still unclear is whether the White House has any specific thresholds for progress on those issues and what China might do for the U.S. to reverse the tariffs or investment curbs, according to administration officials and outside advisers.
“It’s a little bit of a red herring for the business community to be overly critical that there aren’t clear off-ramps for China, because it’s really unclear if the Chinese would even take them,” said one outside adviser to the administration who has been briefed on the planning of the trade actions against China.
The adviser added that leaders gathered this week at China’s National People’s Congress, the country’s rubber-stamping legislative body, appeared to “quintuple down” on their industrial policies geared toward elevating the country’s economy.
Still, the business community has urged congressional trade leaders to press Lighthizer, who is scheduled to testify on Capitol Hill this week, on what kind of outcome the administration hopes to achieve. 

Trump was granted the authority to impose the trade restrictions under Section 301 of the Trade Act of 1974.
“The overall focus of the Section 301 investigation should be to bring China to the negotiating table for a meaningful resolution of specific, sector-by-sector issues with the ultimate goal of removing the offending practices and policies. Premature, unilateral sanctions alone are unlikely to achieve this objective,” National Foreign Trade Council President Rufus Yerxa wrote in a letter sent Tuesday to Republican and Democratic leaders of the House Ways and Means and Senate Finance committees.
The expected 300-page report the administration is putting together as part of its probe into China’s intellectual property and technology transfer policies makes some recommendations on what China should do to curb those practices, a source familiar with its contents said.
But the tariff action Trump is ready to move ahead with seems geared more toward gaining leverage against China than achieving a methodical engagement, said an administration official involved in the planning.
“There’s a recognition that you have to punch a bully in the face,” the official said. 

“That’s the best explanation of what’s going on here.”

Axis of Evil

Trump Considering Embargoing China Over North Korea
By Gordon G. Chang

Late Sunday morning, President Trump tweeted an extraordinary statement. 

“The United States” he announced, “is considering, in addition to other options, stopping all trade with any country doing business with North Korea.”
And the president’s tweet does not appear to have been an off-the-cuff blast. 

Treasury Secretary Steve Mnuchin continued the theme in his “Fox News Sunday” interview later in the day when he announced he was preparing a sanctions package that will sever “all trade and other business” with North Korea. 

“I will draft a sanctions bill and send it to the president,” Mnuchin said to Chris Wallace. 

“We will work with our allies. We will work with China. But people need to cut off North Korea economically.”
Cutting off North Korea economically sounds like an embargo. 

And North Korea’s No. 1 trading partner—the country that accounts for slightly more than 90% of Pyongyang’s two-way trade when illicit commerce is counted—is China.
An American embargo almost surely will result in friction with Beijing and Moscow, but discord could be the price for denying Kim Jong Un the resources for his weapons programs.
There are many ways an embargo can be put in place. 

The Trump administration could simply declare one and then go about enforcing it on its own.
An alternative route would be for the White House to tell Chinese and Russian leaders that the U.S. intended to submit an embargo resolution to the Security Council and then demand they accept it without delay.
Why would Beijing and Moscow accept an embargo when they have consistently resisted far less strict measures? 

With regard to China, Russia’s senior partner in crime when it comes to North Korea, the Trump administration retains overwhelming leverage.
Chinese banks, for instance, are vulnerable to U.S. criminal prosecution and, more important, sanctions. 

Bank of China, named in a 2016 U.N. report for money laundering for Pyongyang, is especially at risk. 

The U.S. Treasury could fine the bank or even designate it a “primary money laundering concern” pursuant to Section 311 of the Patriot Act.
Such a designation would deny the bank access to dollar accounts. 

In other words, a Bank of China would, as a practical matter, be cut off from the global financial system. 

Call it, in essence, a death sentence.
Up to now, China has not had an incentive to cooperate with the United States with regard to North Korea because American presidents were loath to impose costs on the Chinese state. 

The feeling was that Washington could appeal to the better instincts of China’s leaders, or at least convince them it was in their long-term interest to support American efforts.
This generous approach, unfortunately, has not in fact worked. 

So it is time to make sure that the Chinese, even though they do not see things the same way as Trump officials, have no choice but to be cooperative.
Unplugging a major Chinese bank is one of the few acts that can motivate Beijing to accept and enforce an embargo. 

And so could a severe remedy imposed as a result of the ongoing Section 301 investigation into China’s theft of American intellectual property. 

One “301” remedy would be an across-the-board tariff on Chinese goods. 

Another would be an import ban on any enterprise benefitting from stolen IP.
Chinese officials, of course, can retaliate against the U.S. for a Section 311 designation or a Section 301 remedy, but Beijing might decide not to take on a far-stronger America, which is in a better position to wage an intensified trade war.
In ordinary times, drastic remedies like an embargo would not be necessary. 

Yet Kim Jong Un has not in fact been deterred by the relatively mild penalties now in place. 

China and Russia have signed on to Security Council sanctions, like those contained in Resolution 2371, precisely because they know they would be ineffective.
Kim is making such fast progress in building his arsenal that sanctions that were considered extraordinary just a few months before are now beginning to look politically feasible today.
As Trump and Mnuchin made clear on Sunday, America is about to cut off the flow of funds to the Kim regime.
Washington, I believe, goes a long way to disarming North Korea when it convinces Chinese leaders they finally have to make a choice, that they cannot support the North and do business with the U.S. at the same time.