As influential voices within the
U.S. business community warn China that U.S. President Donald
Trump is serious about tough action over Beijing’s trade
practices, there is little sense of a crisis in the Chinese
capital, where officials think he is bluffing.

FILE – In this November 9, 2017 file photo, an American flag is flown next to the Chinese national emblem during a welcome ceremony for visiting U.S. President Donald Trump outside the Great Hall of the People in Beijing. China warned Washington on Thursday, January 10, 2018, it will “resolutely safeguard” its interests ahead of a possible decision in an investigation into whether Beijing improperly pressures foreign companies to hand over technology. Photo: AP Photo/Andy Wong, File

In Beijing, many experts think Washington is unwilling to
pay the heavy economic price needed to upset prevailing trade
dynamics between the world’s two largest economies.

Hanging over trade relations are several inquiries into
whether steel and aluminium imports – including those from China
– are harming U.S. national security, possible tariffs on
imported solar panels, as well as an investigation into
potential Chinese abuse of intellectual property.

“I think this might be a threat to ask for deals from
China,” said He Weiwen, a senior fellow at the Center for China
and Globalization, a government-affiliated research organisation
in Beijing.

Results in most, if not all, of the investigations are seen
as imminent. Trump warned in an interview with Reuters on
Wednesday of potentially “big damages” against China as a result
of the intellectual property inquiry under Section 301 of the
Trade Act of 1974.

People in the U.S. business community say this growing gulf
in expectations between Washington and Beijing is fuelled in
part by the dwindling frequency of talks on commercial issues.
The resulting vacuum could set the two governments on a
collision course over trade.

“Dialogue is a shadow, a shell, a trickle of what it was,
particularly on the economic and commercial issues,” said one
U.S. industry source who accompanied a business delegation to
Beijing last week to warn senior Chinese officials that time was
running out.

The bipartisan group of mostly former senior U.S. officials,
including George W. Bush administration veterans Stephen Hadley
and Carlos Gutierrez, met with Wang Yang, a member of China’s
ruling seven-man Politburo Standing Committee, and Liu He, an
economist and ally of President Xi Jinping, among other senior
Chinese leaders, the person said.

They delivered a message that trade frictions “are not under
control” and that there was a high likelihood of “significant
actions” coming soon, according the person who was present at
the meetings.

“We hear everything from: both sides will lose, to you’ll
lose more,” the person said, characterizing the reception the
delegation received from Chinese leaders.

RESILIENT TO A TRADE WAR

U.S. businesses operating in China have long chafed at
government policies they see as intended to assimilate and
supplant foreign technology.

At stake is who controls intellectual property, and how you
protect it, said Tim Adams, former U.S. Treasury undersecretary
for international affairs in the Bush administration.

“The question is, how do you use a scalpel to respond to it,
and does the scalpel actually change behaviour because it’s a
scalpel and not a sledgehammer,” said Adams, who now leads the
Washington-based Institute of International Finance.

He said China would probably retaliate by weighing whether
the actions were in line with World Trade Organization rules
before slowly ratcheting up pressure on U.S. businesses, for
example by buying from a European company such as Airbus instead
of Boeing.

Meanwhile, China’s 2017 trade surplus with the United States
reached an all-time high of $275.81 billion, Chinese Customs
data showed last week.

The growing likelihood of U.S. trade remedies against China
comes amid a bipartisan push in Washington to tighten national
security reviews of Chinese companies’ efforts to scoop up U.S.
technology firms, often in industries closed to U.S. companies
in China.

But many in China see such efforts as sure to backfire.

“Politically, the administration of President Donald Trump
can’t afford to see China-U.S. economic and trade ties become
strained. China is more resilient to a trade war,” China’s
state-run Global Times said on Sunday.

China’s Ministry of Commerce did not comment on the U.S.
business delegation or the risk of major trade friction. But it
said last week that China would take all necessary measures to
defend itself.

“KIBBLES AND BITS”

Beijing suspects that even if Trump implements “targeted
tariffs,” as some in the U.S. tech sector expect, they would
likely amount to just a few percentage points of the more than
$600 billion annual goods and services trade, Chinese experts
have said.

For local governments in export-dependent areas, the threat
is more worrying. One official in the export powerhouse of
Zhejiang province expressed concern to Reuters about Trump’s
possible actions, but declined to speak on the record.

The government in Beijing, however, remains stoic.

“Are Chinese officials getting nervous now amid a coming
U.S.-China trade war? I don’t think so,” said Wang Jiangyu, a
trade expert at the National University of Singapore.

The country has negotiated its way out of previous Section
301 investigations, including in 1992 and 1995.

And a person close to China’s Commerce Ministry, who asked
not to be named because of the sensitivity of the matter, said
tariffs from the Section 301 case would be self-defeating, and
urged negotiation instead.

“We should sit down and discuss this. If their demands are
reasonable, we don’t want to go to the WTO,” the person said.

That inclination to fall back on talks and the WTO to
resolve frictions may be China’s miscalculation this time,
people in the U.S. business community say.

What the Chinese government doesn’t understand is that the
Trump administration is “deadly serious,” the member of the U.S.
business delegation said. “They aren’t going to settle for
kibbles and bits.” – Reuters