December 18, 2017 / 10:54 AM / a month ago

Breakingviews - Trump’s China diagnosis falls short of a remedy

By Gina Chon

WASHINGTON (Reuters Breakingviews) - Donald Trump’s diagnosis of China’s threat to America’s economic health is still missing a remedy. In his latest complaint, the U.S. president will slam Beijing’s rising financial might as a national security threat. It may signal coming tariffs related to intellectual property and other issues. At the same time, aides say they need China’s help on North Korea. It doesn’t mesh.

The Trump administration has been building up to an economic confrontation with China. In the spring, it launched investigations into unfair trade practices around steel and aluminum that threatened national security. In August, the White House added a probe reviewing whether Chinese policy around technology transfers and intellectual property hurt U.S. businesses.

In a speech on Monday on the administration’s national security strategy, Trump will call out China as a strategic competitor and revisionist power. For example, Beijing is seen as a serious challenger to what senior administration officials on Sunday called the U.S. national security innovation base, which includes theft of intellectual property.

The criticisms could be a precursor to tariffs or other punitive actions. Administration officials also said the government will step up its protection of data and research and development and update the parameters of the Committee on Foreign Investment in the United States, which reviews foreign takeovers for national security concerns.    

But the officials also said the White House needs China’s help on North Korean aggression. In September, China’s central bank told local lenders to strictly implement UN sanctions, according to Reuters. The White House thinks Beijing hasn’t gone far enough.

Meanwhile, heated U.S. economic rhetoric could cause China to retaliate. Chinese Ambassador Cui Tiankai recently warned about the costs of a trade war, saying it would hurt global growth. In 2015, U.S. tech companies pleaded with the Obama administration to hold back on cyber-related sanctions for China, fearing a backlash in Beijing.

The White House now wants to have its cake and eat it, too, by punishing China for unfair trade practices and gaining Beijing’s assistance to rein in North Korea. But the two goals are at odds with each other. Given the existential security threat posed by Pyongyang, it’s hard to see how increasing tensions with China helps America – or the world.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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