As far as Internet comments go, the public responses to the Trump administration’s forthcoming action against unfair Chinese trade practices are a pleasure to read. The subject matter—a proposal to levy a 25 percent tariff on a list of imports from China, as permitted under section 301 of the U.S. Trade Act of 1974—is pretty dry. But that helps weed out a lot of the trolls, as does the fact that commenters are required to provide their full names, addresses, and other identifying information. There’s a charm to informed citizens earnestly engaging with their government, even if it’s nearly certain the administration is preparing to plow ahead on the tariffs anyway.
Still, the comments are illuminating in the way they underscore the global reach of seemingly small players in the American economy. Alan Wilson of Kila, Montana, owns a company that sells and services plastic-molding machinery. His comment is respectful, nuanced, and concerned about how the administration’s actions could affect his business. “Currently we sell and service a Chinese machine for the past 10 years, with some success keeping our remaining customers competitive with these machines,” Wilson writes. “This will penalize our companies to pay additional money for equipment they already agreed to, hurting our citizens not China. So please review and [provide an] exemption on items ordered prior to any new tax or tariff.”
Here’s another, from Christopher Kinney of Oxford, Georgia. “We have been operating our small business, Sky Electronics, selling electromechanical relays . . . for more than 30 years. We contract manufacture in China and sell these relays here in the United States. Your proposed 25% tariff on the relays we import would have a devastating effect on our business. Most of these relays are a commodity item and we would be at an immediate cost disadvantage if this duty took effect,” Kinney writes. “I don’t know what you are trying to do implementing these tariffs but the result would be the loss of many small businesses here in the United States.”
“I work at a commodity import company that supplies steel nuts to the industrial market,” writes Chuck Halpin of Chadds Ford, Pennsylvania. “The products we sell are not intellectual property, technology transfer or innovation. The inclusion of these types of commodity products in the tariff undermine the general intent of the tariff. This action interrupts the supply of the commodity product, increases pricing and may hinder manufacturing in the US as supply dwindles. This type of low cost product is not where the US will build it’s [sic] manufacturing base and the interruption of supply hurts everyone.”
The comment period lasts through May 11, after which the law requires a public hearing and a shorter round of post-hearing comments. The administration is moving forward regardless. “We’ve been hearing from the very same small businesses for years about how China’s unfair trade practices have been harming them, and this president has been willing to stand up and help them,” says Clete Willems, a senior adviser at the White House on trade. “Everyone gets that there’s a larger picture here and that the path that we’re on is unsustainable.”
Robert Lighthizer, the U.S. trade representative (USTR), told Congress in March that the administration had used an algorithm to determine which Chinese products to include on its list so as to “maximize the pressure on China and minimize the pressure on U.S. consumers.” A big chunk of that list of more than 1,300 imports facing the new tariff consists of industrial inputs and commodities—steel nuts, machine tools, ball and roller bearings, transistors, and conveyor belts, to name a few. The White House says the harm to American businesses dealing in such products is far outweighed by the relief that the overall economy, and other firms, would receive from a change in Chinese trade practices.
“It’s a strategy we’ve pursued because we think it’s in the long-term interest of our entire economy, and those people who today rely on sourcing from China may tomorrow be the victims of China’s industrial policy. We are trying to position our economy for long-term success here,” says Willems.
The impetus behind these particular tariffs can be found in a 180-plus-page report released by the USTR on March 22. In the report, the result of a thorough investigation into unfair practices by China, the administration demonstrates how China breaks World Trade Organization rules and international laws to disadvantage American firms and even threaten the national security of the United States. For one, China’s command-and-control economy restricts foreign investment to companies willing to transfer their proprietary technology to state-controlled entities, in violation of World Trade Organization rules. China also limits the ability of American companies to set reciprocal licensing terms with Chinese companies. To do business in China, you’ve got to play ball by their rules.
And then there’s the outright theft of American technology. The USTR report cites a number of instances that show cybertheft by Chinese entities is a critical part of Beijing’s industrial policy. One cybersecurity firm, the report notes, found in 2013 that a division of China’s People’s Liberation Army was stealing data “from at least 141 organizations, 115 of which are based in the United States, representing 20 major business sectors. The victims of these intrusions match industries that China has identified as strategic priorities, including four of the seven ‘strategic emerging industries’ that China identified in its 12th Five-year Plan.”
Within the Trump administration, there is consensus, officials say, about the need to address these unfair trade practices. But about how to address it? White House aides admit there have been disagreements. One of the central players was Gary Cohn, the chairman of the National Economic Council who resigned earlier this year. His influence continues in the administration’s efforts to push more aggressively to settle disputes within the WTO. But Cohn strongly opposed tariffs as the first tool to change Chinese behavior. His chief opponent was Peter Navarro, Trump’s top trade adviser and perhaps the strongest advocate in the White House for protectionist policies. It’s clear who won that dispute.
Cohn was replaced at the NEC by another ostensible free trader, Larry Kudlow, who has spent his first few weeks on the job trying to calm financial markets every time the president announces or suggests new protectionist measures. On April 4, his third day at the White House and only hours after the administration released its list of Chinese products facing the 25 percent duty, Kudlow trotted out to the cable news cameras as markets recoiled from the list and China issued threats of retaliatory tariffs on American agriculture exports. “I doubt if there will be any concrete action for several months,” he said, looking like Leslie Nielsen’s police detective in The Naked Gun, waving off onlookers in front of a comically exploding building by telling them there’s “nothing to see here.”
Kudlow’s scrambling response reflects the still-raging split about the fundamental point of these actions targeting the Chinese trade regime. White House aides insist the tariffs are a tool, a means to an end where China acts fairly. “We hope at the end of the day that China comes to the table and the tariffs aren’t necessary,” says Clete Willems. “We hope this will actually lead to a situation where China, once and for all, takes us seriously and changes its behavior.”
Navarro is much more confident that tariffs would simply benefit the U.S. economy. “If you think about the trade issue, ultimately I think it’s really a good thing for the market that we are doing these kinds of trade actions,” he said on CNBC on April 2. In a Wall Street Journal op-ed in March of 2017, Navarro argued that reducing the trade deficit will help reduce foreign investment in the United States, which he claims represents Warren Buffett’s ominous concept of “conquest by purchase” by foreign governments, chiefly China. A reduction in foreign investment, then, means more domestic investment by American manufacturers. Tariffs, for Navarro, are not simply about curbing unfair trade practices—they’re an end in themselves, a chance to stand athwart the globalizing economy, yelling stop.
Hearing this kind of stuff makes the large number of free-traders on the White House staff cringe—but it also speaks directly to President Trump’s own perception of what ails America’s economy. The result is a confused policy, trying to marry the concept of fair but open trade to the Trump-Navarro protectionist ethic.
The public commenters on the new tariffs seem confused as well. Tom Phillips of Jacksonville, who fears they could devastate his small business, says his company imports Chinese air conditioning parts to assemble in the United States. “I thought the issue was theft of intellectual property,” Phillips writes in his public comment. “I don’t understand why the Tariff code for air conditioning parts is being included in this regulation.”
