For its part, China is looking to line up other countries against the U.S., Chinese officials said—especially in Europe, whose companies could benefit should China react to the stepped up pressure by retaliating against the U.S. Beijing has already responded to early volleys from Washington in the trade conflict with retaliatory tariffs of its own.
Administration officials familiar with the U.S. strategy say that the U.S. trade representative, as early as next week, will detail which products are on the list of $100 billion in Chinese goods subject to 25% import tariffs. The initial hit list of $50 billion in Chinese imports didn’t include some consumer staples such as clothing, mobile phones or shoes, to minimize consumer impact and limit domestic criticism. But trade experts say the sheer size of the expansion of the hit list makes the inclusion of consumer goods inevitable.
At the same time, the Treasury Department is crafting sharp prohibitions on Chinese investment in advanced U.S. technology, whether by acquisition, joint ventures, licensing or any other arrangement, according to a senior administration official. The agency is targeting China’s subsidization of domestic industries to turn them into so-called technology national champions, the official said.
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The administration is debating whether to make the investment restrictions permanent, even if China changes its industrial policies, the official said. The restrictions then could be used to make sure China carries out pledges and would warn other countries not to mimic Chinese behavior. The Treasury is expected to devise a plan by early June.
The actions come as administration officials argue the Chinese are already bending to the U.S.’s will. They point to a speech on Tuesday by Chinese President Xi Jinping, who promised to roll out measures this year to lower tariffs on imported cars and to ease foreign ownership restrictions on auto makers in China.
“It was the most conciliatory thing we’ve heard since the whole discussion began,” said a White House official. “Up to then, it was mean, nasty, cruel name-calling.”
Business groups in Washington, D.C., have been lobbying hard, telling the White House that tariffs are counterproductive. But administration officials have come to the opposite conclusion: They believe the threats are working. “China basically surrendered [with the Xi speech] and he [Trump] is probably going to put even more pressure on them before he accepts whatever their bottom line becomes,” said a person familiar with White House views.
Publicly, Chinese officials deny they are bending to Washington’s pressure, but privately, they acknowledge that the trade threats are leading them to accelerate their plans to liberalize.
Currently Beijing levies a 25% import tariff on vehicles, compared with the U.S. 2.5% tariff—an imbalance President Trump has repeatedly attacked, even though the U.S. has its own 25% tariffs on pickup trucks.
Beijing also requires foreign car makers to enter into a 50%-50% partnership with Chinese companies to set up plants. Chinese officials said the auto tariff would be reduced and the ownership cap would be lifted gradually, adding they might lift the cap within three to five years.
While that might seem slow to U.S. officials, such a timetable would require Beijing to take on powerful local interests, including state-owned firms. “Pressure from the U.S. is providing an impetus to the need for change,” said a Chinese official.
Resistance to such change was on display at a closed-door panel discussion Tuesday at the high-level Boao Forum, where politicians mingle with business leaders. China’s former commerce minister, Chen Deming, said at one panel that if Beijing were to make concessions in the auto sector, it should ask Washington for similar concessions in return, said people familiar with the discussions.
China’s new central banker Yi Gang, for instance, announced that foreign ownership caps on securities and life-insurance companies, which are currently being raised to 51% from 49%, would be abolished in three years. But the Trump administration and foreign companies don’t think that would help much because Chinese institutions now dominate the domestic securities and insurance markets. They seek immediate elimination of ownership caps.
Mr. Yi wouldn’t go that far. “The Chinese philosophy is gradualism,” he said.
Both sides are gearing up for a lengthy fight. When Mr. Trump announced the additional tariffs on $100 billion in goods on April 5, many trade experts dismissed it as simply talk. But officials said that it had been discussed earlier with U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and White House trade adviser Peter Navarro, among others.
According to the Trump White House, the U.S. had been judicious in its initial threat of tariffs on $50 billion in Chinese goods, which equals about 10% of Chinese merchandise exports to the U.S. of $506 billion. China quickly retaliated with its own $50 billion threat, but that equals 38% of the U.S.’s $130 billion in exports to China. The additional $100 billion in goods targeted for retaliation was meant to even the score—about 30% of China’s goods exports would be subject to tariffs, U.S. officials said. China said it would retaliate for these levies too but wasn’t specific.
To try to limit domestic opposition to its tough line, the administration now is working on a program, which could cost billions of dollars, to compensate farmers suffering from Chinese retaliatory tariffs on U.S. crops. Mr. Trump also said he would consider joining a reconstituted Trans-Pacific Partnership, a trade group of 11 Pacific Rim nations, including Japan, which could give the U.S. additional leverage in any talks with China.
For its part, China is looking to line up other countries against the U.S. An editorial in the official People’s Daily after President Xi’s speech noted that new openings wouldn’t be applicable to countries that “wage trade wars.” Mr. Yi, the central banker, also said on Wednesday that a stock-trading link between Shanghai and London would be launched by the end of this year.
—Peter Nicholas contributed to this article.
Source : https://www.wsj.com/articles/white-house-plans-to-escalate-trade-pressure-on-china-1523573253?mod=trending_now_4