The budding trade war between the US and China threatens to go into full bloom later this summer — unless Senate Republicans breakout the shears. The White House revealed $200 billion in retaliatory tariffs after China responded in kind to earlier assessments, fulfilling the pledge Donald Trump made to keep escalating until China opened its markets fairly:
President Trump escalated his trade war with China Tuesday, identifying an added $200 billion in Chinese products that he intends to hit with import tariffs.
The move makes good on the president’s threat to respond to China’s retaliation for the initial U.S. tariffs on $34 billion in Chinese goods, which went into effect on Friday, and would eventually place nearly half of all Chinese imports under tariffs.
Trump has framed this as both a trade issue and a matter of national security. The latter allows him to act unilaterally under Section 232 of the Trade Expansion Act, an authority Trump has used to push this trade war with China. The US does have a legitimate national-security issue with China and its China Made 2025 project, which uses its trade leverage to steal or coerce the release of technological advances to further its military and political strength in the region. Earlier efforts to resolve those intellectual property issues through negotiations have failed for years to produce significant improvement, and Trump campaigned on getting tough with China.
The problem is that Trump has been invoking Section 232 to impose tariffs on other trading partners than China without coming to Congress for authority. Jeff Flake has demanded action in the Senate to start narrowing Section 232 to keep the White House from abusing its provisions, and he finally got some traction — albeit with an entirely symbolic vote:
The Senate will take a small step Wednesday aimed at restraining President Donald Trump’s ability to unilaterally levy tariffs, according to Sen. Jeff Flake (R-Ariz.).
Flake said the Senate will address the issue of the president’s ability to levy tariffs under national security grounds, which Republicans and Democrats have accused Trump of abusing, by voting on what is called a sense of the Senate motion. Such resolutions are nonbinding, and lawmakers often use them to formally express opinions about subjects of national interest. In function, it is a message to the president and does not compel him to take or restrain him from taking any action.
Flake said the motion, which will be tacked onto the energy and water appropriations bill being considered by the Senate this week, is simply a “first step.” Last month he said he wanted a “substantive” vote on tariffs ― a higher bar than a nonbinding resolution.
“We’ll follow up with language, but we’ve just got to get to build the support,” he told reporters on Tuesday, adding that he expects the resolution to pass with bipartisan backing.
Whenever Trump’s involved, partisan lines matter more, but this could be the exception. Protectionism cuts more of a geographical than partisan swath through Congress, which means that both sides of the upcoming vote might be bipartisan. The non-binding nature of this resolution will make it a lot easier to support as a message to the White House, too.
Of course, this White House isn’t exactly known for taking hints, either. What happens when Trump ignores it? Over to you, Sen. Thom Tillis:
He says he doesn’t want to hurt Trump’s negotiating hand.
— Haley Byrd (@byrdinator) July 11, 2018
If Flake can move a bill that actually amends Section 232, he might pick up enough Democratic support to pass it, even in the context of Trump’s “negotiating hand.” That runs into a couple of problems, however. Would the House take it up at all, especially with the midterms approaching? And even if both chambers of Congress passed it, Trump would immediately veto it, requiring 67 Senators and 290 Representatives to override him. It seems unlikely that Mitch McConnell would agree to that kind of a showdown, at least not until well after the midterm elections.
By that time, we might find out whether China will back down. The new tariffs outstrip China’s total US imports by 50% or so, which means they can’t retaliate in kind and extent — at least not directly. They do have other options, though:
Chinese officials are expected to retaliate in other ways, hitting U.S. firms in China with unplanned inspections, delays in approving financial transactions and other administrative headaches.
“The Trump administration is gambling that by wielding such a big club, it will force China to back down,” said Edward Alden, a senior fellow at the Council on Foreign Relations. “That is almost certainly a serious miscalculation. China is far more likely just to find other ways to hit back in kind.”
There are ways to match that kind of action, too. Trump just let ZTE off the hook, and it won’t be tough to reinstate sanctions again on that key Chinese telecom/tech giant. The US government has many ways in which to insert red tape and regulatory interference (unfortunately), much of it arbitrary enough to make China’s much more lucrative endeavors here in the US a nightmare.
China may not back down, but they have already begun to dial down, Reuters reports:
Beijing has issued unusually strict rules limiting coverage of the trade war because of worries that unrestrained reporting could spark instability or roil its already jittery financial markets, according to sources within Chinese state media.
“When exposing and criticizing American words and actions, be careful not to link it to Trump and instead to aim it at the U.S. government,” said a memo based on a set of directives issued verbally by government officials that was circulated to reporters at a state-run news outlet and seen by Reuters.
Media outlets must help “stabilize the economy, growth, employment, stabilize foreign trade, investment, finance, stabilize the stock market, the foreign exchange market, the housing market, and basically stabilize the peoples’ thinking, hearts and expectations”, it said.
A person who works at a leading Chinese news website said the rules issued last week were “the most strict yet”.
Perhaps China will discover they really do have more to lose than Trump does in this situation. They seem to be hedging on campaigning, if not on the tariffs themselves. The IP implications of the status quo are significant enough to justify the high-stakes game-playing for a while on both sides, but economically China could end up blinking first.
In general, tariffs are taxes on domestic consumption more than punishment for exporters. That’s why the broader trade wars with other US partners make little sense, such as with Canada, Mexico, and the EU. China, however, might well be the exception — and maybe one reason why Section 232 could use some fine-tuning rather than outright closure.
Anyway, FWIW, Flake did get his vote and his non-binding win:
By a vote of 88-11, the senate just took the first step to rein in the President’s abuse of trade authority by using national security as justification to levy tariffs.
— Jeff Flake (@JeffFlake) July 11, 2018
I understand why Flake calls this “the first step,” in order to cast this as movement. Even in that context, though, it’s a meaningless first step. The Senate doesn’t need to pass a nonbinding resolution before introducing actual binding legislation. The first step is a statutory bill, not a “sense of the Senate” declaration.