Trump To Slap China With A “Huge Fine” – Probably Billions Of Dollars – Over IP Theft

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Jan 18 2018
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During his 2016 election campaign, Trump routinely threatened to impose a 45% across-the-board tariff on Chinese goods. After a year on the throne, the U.S. president hasn’t slapped any punishment on China, an economic power accused of consistently stealing U.S. IP (intellectual property) and jobs as well as practising “one-sided and unfair” trade deficit.


The reason Trump has been dragging his feet was partly due to the needs for China’s assistance to contain North Korea and partly because it could lead to a full-blown disastrous trade war if recklessly executed. Now that the reality is slowly emerging that the U.S. has no choice but to accept North Korea as a new member of the nuclear club, Trump could make his move on China.


Beijing knew Washington has the tool – the Section 301 of Trade Act 1974 – to punish them. The Section 301 allows President Trump to unilaterally impose tariffs or other trade restrictions to protect U.S. industries. Although extremely powerful, the Section 301, which is rarely used, is very damaging not only to China but also to the United States.

US-China Trade War - President Xi Jinping and President Donald Trump

Even American business community disagree that Trump should unleash the “obsolete U.S. trade tool.” The Section 301 is so powerful that it can bypass agreements signed under the WTO (World Trade Organization), of which China is a member. Heck, the Section 301 does not even need an approval from the Congress – making it essentially a bullying weapon.


On Wednesday, 17th January 2018, after an interview with Reuters at the White House, it has been revealed that President Donald Trump is seriously considering to finally punishing the Chinese – “a big fine” – as part of a probe into China’s alleged theft of intellectual property. However, Trump did not specify what he meant by a “fine” against China.


Trump could only say – “We have a very big intellectual property potential fine going, which is going to come out soon. We’re talking about big damages. We’re talking about numbers that you haven’t even thought about.” An educated guess would put such number easily in the region of billions, if not tens of billions of dollars, as a show of U.S. power under Trump administration.

Intellectual Property - Copyright - Trademark

Economic adviser Gary Cohn said China had forced U.S. companies to transfer their intellectual property to China as a cost of doing business there. U.S. businesses claim they lose hundreds of billions of dollars in technology and millions of jobs to Chinese firms which have stolen ideas and software or forced them to turn over IP as part of the price of doing business in China.


It would be an insult to the U.S. business community if the fine totalled only hundreds of millions of dollars, of which China will gladly pay. The so-called “big fine” will not be ready until the U.S. Trade Representative presents its final recommendations to Trump. He also said he would discuss the issue during his State of the Union address to the U.S. Congress on January 30.


Therefore, the punishment would probably be ready for announcement next month. Still, the question remains on how the numbers were reached or how the costs of fine would be imposed. Unless the figure is laughably negligible, China is unlikely to pay as it would be seen as losing face and a defeat on the part of President Xi Jinping.

President Donald Trump Meets President Xi Jinping - Smile and Unhappy Faces

Donald Trump said he hope to avoid a trade war when asked about the potential of such war. He said – “I don’t think so, I hope not. But if there is, there is.” While the U.S. can’t force China to pay, hence, the penalties would probably include a combination of both tariffs and restrictions on Chinese investment in the United States.


Beijing, however, isn’t impressed and rubbished the idea that they have ever stolen U.S. intellectual property. Foreign ministry spokesman Lu Kang claimed there were no laws in China to force foreign investors to transfer technology, but acknowledged such things may happen as part of “market behaviour” between companies working with each other.


Mr. Lu stressed that China will protect its legitimate rights, suggesting that Beijing could retaliate. Earlier, the Chinese reportedly could be slowing or halting altogether the purchases of U.S. Treasury bonds, or simply I.O.U. debt papers. Although Beijing has denied there was such plan, market talks have it that the idea could be deliberately leaked to test the reaction from Trump administration.

China vs America - Dragon arm wrestling Eagle

However, when approached about China’s plans with regard to purchases of U.S. debt papers, the U.S. president insisted that he and Chinese President Xi Jinping had not discussed the subject. Trump claimed he was not concerned such a move would hurt the U.S. economy. Of course, it would be business as usual if the fine is extremely affordable to the Chinese.


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