Published: Fri, June 29, 2018
Markets | By Otis Pena

Donald Trump's Tariffs Have Europe Cozying Up to China

Donald Trump's Tariffs Have Europe Cozying Up to China

Mattis during his visit to China from June 26 to 28 will meet several senior officials to exchange strategic perspectives and discuss areas of mutual concern, the Pentagon said yesterday.

The IEEPA statute allows the president to unilaterally impose investment limits.

It's all but certain the Chinese will raise those issues with Mattis, as well as Beijing's long-held opposition to increasing USA contacts with Taiwan.

Those concerns were stoked Monday by reports that the Treasury Department is looking at an emergency law beefing up scrutiny of investment by Chinese firms in sensitive U.S. industries.

The list of targeted products focuses on those that contribute to China's "Made in China 2025" initiative - Beijing's ambitious plan to upgrade its manufacturing and technology base and grow its own pharmaceutical sector.

Mattis recently criticised China's militarisation in the South China Sea in recent months in his speech at the Shangri-La Dialogue in Singapore, highlighting China's deployment of anti-ship missiles, surface-to-air missiles, electronic jammers, and more recently, the landing of bomber aircraft at Woody Island.

Since June 17, a group of navy warships, including a Type 054A frigate and a Type 052C destroyer, have been conducting exercises near Taiwan, including in the Bashi Channel and the Taiwan Strait, said 81.cn, an official publication of the Chinese army. "One generally finds losers on both sides".

Derek Scissors, a China scholar at the American Enterprise Institute who consults regularly with the administration, said that he believes Mnuchin would prefer to apply the text of a bill working its way through Congress to strengthen national security reviews of USA acquisitions to investments by China.

Trump has also threatened to slap tariffs on an additional $200 billion of Chinese imports.

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The proposed new curbs on Chinese ownership come at a time when the USA and China are already involved in an escalating conflict over trade, following the Trump administration's levying of tariffs on hundreds of billions of dollars worth of goods. Soybeans are China's biggest import from the United States by value.

The outlet says those initiatives include blocking firms with at least 25 percent Chinese ownership from investing in USA technology companies and barring additional technology exports to China.

Historically, in simple USA terms, worldwide trade generally only has a 10 percent effect on our economy.

Further confusing matters, White House trade adviser Peter Navarro told CNBC Monday that "there's no plans to impose investment restrictions on any countries that are interfering in any way with our country".

"Given the size of China's economy, the demonstrable extent of its market-distorting policies, and China's stated intent to dominate the industries of the future, China's acts, policies, and practices of economic aggression now targeting the technologies and IP of the world threaten not only the USA economy but also the global innovation system as a whole", the report said. But the White House itself earlier announced plans to unveil the restrictions by Saturday.

A senior European Commission official said on Saturday that the European Union will respond to any US move to raise tariffs on cars made in the bloc.

Mnuchin has been less visible publicly since then, as the more hawkish wing of the administration's trade team seemed to have successfully turned the tides against the faction that was in favor of finding a negotiated solution for the two countries.

The move marks another escalation of President Donald Trump's trade conflict with China, which threatens to roil financial markets and dent global growth.

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