Is Trump’s Get-Tough Approach With China Working?

With the Trump administration poised to slap China with tens of billions of dollars in across-the-board tariffs as soon as Thursday, is the get-tough approach finally forcing Beijing to clean up its act on trade?

On Tuesday, Chinese Premier Li Keqiang made all the right noises in a big speech at the end of the National People’s Congress, seemingly tendering an olive branch to Washington by vowing to address some of the biggest U.S. concerns with China’s economic practices.

Li said China doesn’t want a trade war and wants a more balanced trade relationship with the United States. He also promised to open up the Chinese economy, especially the manufacturing sector. Finally, he vowed to stop forcing foreign companies to share their technology with Chinese firms, one of the biggest complaints international businesses have about doing business there.

U.S. business groups, while still skeptical of the pace of Beijing’s promised reforms, welcome what they hope is long-delayed progress to open up China’s economy, apparently the result of the Trump administration’s sticks-over-carrots approach.

The American Chamber of Commerce in China “is pleased to hear that China says it will provide more market access to foreign business and do a better job of protecting intellectual property,” says William Zarit, the group’s chairman. “The proposed trade remedies may not be perfect, but based on past talks, the U.S. probably feels that without pressure, little progress will be made.”

But longtime China watchers are taking Li’s promises with a grain of salt. Since even before President Donald Trump took office, Chinese officials led by President Xi Jinping have tried to seize the high ground in terms of supporting the global trade order with flowery rhetoric — but which seldom translates into concrete progress on the ground.

“The Chinese are basically using this rhetoric to set up a contrast with Trump’s protectionism,” says Charles Boustany Jr., a former U.S. congressman who now directs the Center for Innovation, Trade, and Strategy at the National Bureau of Asian Research. As with Xi’s well-received speech at the World Economic Forum in Davos, Switzerland, last year, when he vowed to fill the leadership role the United States was abdicating, “they set themselves up as the protector of free trade,” he adds.

China has been promising to open up its economy since at least the Third Plenum in 2013 but with little to show for it — and even China’s much-touted announcement last year that it would open its financial sector to foreign firms offer less than meets the eye.

U.S. and European businesses operating in China still complain about being forced to hand over their technology as the cost of doing business, and nearly all are concerned about the theft of intellectual property. U.S. companies are growing less optimistic about the business climate there, one-fifth report having to hand over technology, and most have seen no real follow-through on the big reforms promised five years ago, according to the 2017 U.S.-China Business Council member survey.

“The situation has gotten worse over time, with forced technology transfers, intellectual property theft — nothing’s changed,” Boustany says. “The rhetoric sounds good, but there’s no action.”

If Li’s conciliatory speech Tuesday was meant to placate Washington and perhaps forestall a trade war, by Wednesday Chinese officials had replaced promises with threats. (Li’s less inflammatory speech was at any rate overshadowed Tuesday by Xi’s fiery call to defend every inch of China, widely seen as a veiled warning to Taiwan.)

Vice Commerce Minister Wang Shouwen decried what he called “unilateral protectionist” measures from the United States and said China would “safeguard” its interests, Reuters reported.

Also on Wednesday, Chinese Foreign Ministry spokeswoman Hua Chunying shot back at the threat of sweeping trade restrictions. She noted that tariffs on Chinese exports to the United States would most clearly hurt U.S. firms and consumers and struck a defiant tone at odds with Li’s earlier speech.

“We want no trade war with anyone, but if our hands our forced, we will not be scared nor hide,” Hua said. “If they day comes when the U.S. took measures to hurt our interests, we will definitely take firm and necessary countermeasures to safeguard our legitimate interests.”

U.S. Trade Representative Robert Lighthizer, testifying before the House of Representatives on Wednesday, said the administration is “gaming out” likely Chinese responses, noting that a preferred target is U.S. agricultural exports such as soybeans.

The Chinese warnings echo a growing chorus of pleas from U.S. business groups, from retailers to tech firms, which fear that across-the-board tariffs on a wide range of Chinese imports will hurt their bottom line and raise prices for consumers. The National Foreign Trade Council, a business association, wrote top lawmakers urging them to push the Trump administration to change course before launching the trade action.

“Unilateral imposition of tariffs prior to any meaningful negotiations with China,” the group wrote, “will turn the focus from China’s unjust behavior to the legitimacy of our own action” and make it harder to rally international support to get Beijing to change its behavior.

Despite all the appeals, the Trump administration appears determined to forge ahead with the toughest suite of U.S. trade actions on Beijing in decades; the White House said Wednesday it would lay out Thursday the new measures to be taken against China to counter what it calls theft of U.S. technology and intellectual property. Politico noted the administration’s rationale: “There’s a recognition that you have to punch a bully in the face,” an administration official told the outlet.

The specter of sweeping new unilateral tariffs comes on the heels of steel and aluminum tariffs that largely target imports from key U.S. allies, sparking threats of reprisals from Brussels to Brazil. Those trade actions make it that much harder for Washington rally a global coalition alongside the European Union and Japan that would be required to put meaningful pressure on China, Boustany says.

“We need a concerted effort, to sing off the same sheet of music, to force the Chinese to truly change,” he says.