Trump’s Trade Chief Advocates ‘Strategic Decoupling’ From China

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(Bloomberg) —

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President-elect Donald Trump’s pick for the top trade position sees China as a “generational challenge” to the US and has advocated for a strategic decoupling from the country.

Jamieson Greer, who’s been nominated as the US Trade Representative, played a key role in imposing tariffs on China during Trump’s first term. As former chief of staff to Robert Lighthizer, who was Trump’s trade representative then, Greer shares a tough stance on Beijing. The president-elect has already begun unveiling policy plans, including a vow Monday to impose 25% tariffs on all imports from Canada and Mexico, and an additional 10% on Chinese goods.

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In his May testimony before the US-China Economic and Security Review Commission, Greer provided a roadmap for the policies the new administration might pursue, including action to prevent Chinese companies from relocating to other countries to dodge US tariffs.

“There is no silver bullet, and in some cases the effort to pursue strategic decoupling from China will cause short-term pain,” he said. “However, the cost of doing nothing or underestimating the threat posed by China is far greater.”

Here are his main policy recommendations: 

Trade Relations

Greer calls for Congress to revoke Beijing’s “permanent normal trade relations” status and impose new, higher tariffs on Chinese goods.

China was granted PNTR in 2000 as it prepared for entry into the World Trade Organization, receiving similar tariff treatment as most other nations. Revoking this would put China in the same category as Cuba, North Korea, Russia and Belarus, and subject all direct Chinese exports to the US — worth about $500 billion last year — to even higher levies.

Customs Rules

Greer also suggests limiting Chinese goods entering the US through other countries by ensuring that if a Chinese company or its unit manufactures a product elsewhere, or if the Chinese content in a product exceeds a certain threshold, that product should not receive preferential treatment under free trade agreements.

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This would lead to higher tariffs on goods made by Chinese companies in places like Mexico, or products made with a large amount of Chinese parts, such as cars. To avoid tariffs, some Chinese firms have relocated to Mexico, taking advantage of the trade deal between the US, Mexico and Canada.

Economic Coercion

Greer recommends that Congress pass laws to protect US companies from economic coercion or retaliation by China. This could include allocating tariff revenue to support affected workers and firms, as well as giving the president the authority to take action against foreign companies that take advantage of Chinese retaliation by backfilling into the Chinese market.

This means if China blocked an American firm from selling in its market, the US might compensate that company. It could also lead to Washington taking action against firms from Brazil or elsewhere if they start selling more soybeans or other goods to Beijing to replace US sellers who have been shut out. 

Export Controls

Greer calls for expanding export controls on China to cover a wider range of critical industries, such as aircraft, transportation equipment and legacy semiconductor manufacturing equipment.

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This would be a step up from current US export controls, which mainly focus on advanced semiconductors. The measures block China from getting the latest technologies and equipment needed for chips used in AI, military systems and communications. The US has also pressured countries like the Netherlands, Japan and South Korea to limit exports to China, making it harder for China to access key technologies.

Investment Controls

Greer calls for Congress to allow the US government to review outbound investment into China across a wide range of sectors with economic and strategic significance. He says the executive branch should have the authority to block such investments if they pose a threat to US economic or national security.

The Biden administration is set to introduce restrictions on US investments in China’s advanced tech sectors, like semiconductors, AI and quantum computing. Some investments will be banned, and others must be reported to the US government. These rules will complement existing export controls on advanced chips. China’s Foreign Ministry has strongly condemned the move.

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Manufacturing Support

Greer suggests that Congress should consider expanding incentives for critical sectors, similar to those in the CHIPS and Science Act or the Inflation Reduction Act. The targeted industries include pharmaceuticals, robotics, medical devices, aircraft, automotive, energy products, telecommunications and electronics. 

In August 2022, President Biden signed into law the bipartisan Chips Act, which set aside $39 billion in grants to boost domestic semiconductor manufacturing and $11 billion for research and development efforts — all geared toward limiting reliance on Asia for critical electronic components.

Greer also advocates for strengthening restrictions to prevent Chinese firms from selling products to the US government, and recommends that Congress direct the Treasury to set up a China-specific sanctions regime focused on issues such as international security and human rights.

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