Trump Announces Stiff Tariffs Against China

China will be hit hard by the new tariffs President Trump announced this year. The stiff tariffs, the President said, is due to China’s harmful and unfair U.S. technology acquisitions. The annual stealing of American IP by the Chinese, according to the United States Trade Representative’s 2017 report has already costs the United States between $225 million and $600 billion.

credit: CNN Money

Tariffs To Be Imposed On Chinese Goods Worth About $50 Billion

The penalties for IP theft is among the highest. These tariffs announced by President Trump will be imposed on imports from China with a total worth of $50 billion. Intended as punishment for China’s alleged stealing of U.S. intellectual property, tariffs have also been justified for national security reasons. China’s intellectual property violations allegedly include theft of trade secrets, counterfeiting of popular brands of consumer items, and exerting pressures on businesses to share their technologies with Chinese firms to be able to access the vast market in this country.

International competitors have been complaining about China’s intellectual property violations for years. In the past countries have avoided doing business with China for this reason but as China’s economy grows and extends influence into the international scene, trading partnerships are becoming ever more necessary. It seems that President Trump has felt that the deployment of measures to correct this situation has not been enacted fast enough.

Trump Seems To Be Fulfilling A Promise

His recent announcement seems to be a fulfillment of his promise to impose a 25 percent tariff on imports of steel and 10 percent tariff on imports of aluminum. Trump did not include Mexico and Canada from these tariffs, seemingly extending these countries an olive branch of peace. This situation could prevail if the U.S. is able to swing the results of new talks within the North American Free Trade Agreement in its favor. But Trump’s recent tariff announcement also indicated that he could impose the same sanctions for U.S. allies.

Will This Start A Trade War?

Existing trading partners of the U.S. promptly cried foul when the new and stiffer tariffs were announced. Business leaders, economists, and Republican lawmakers likewise expressed their dissent over the new tariffs. Talks about the potential reprisals from China and the European Union and other trade partners are growing. All these things raise the potential of slower economic growth and bond and stock markets getting scared about the possibility that Trump may have just started a global trade war.

Here’s How The Chinese Look At IP

The traditional forms of appropriating intellectual properties, whether created by Americans or other foreigners, are counterfeiting of pharmaceuticals and luxury goods, software and record piracy and film. Eventually, IP was included in the trade process, although the process was slow and took a longer time.

In the case of suspected piracy and theft, the USTR (United States Trade Representative) launches a protest claiming China’s violation in its failed effort to stop the piracy of goods produced in the U.S. Then the two trade partners devise an MOU (memorandum of understanding) and agree that China would agree to prevent piracy. But after three years, the USTR might find that Chinese violations are still persistent. Then the trading partners will devise another and more specified MOU.

And this cycle will go on and on. Finally, the domestic copyright firms in China found themselves in competition with foreign goods that are cheaper copies of their own. These Chinese industries exerted pressure on their government to strengthen their own IP regulations and enforcement. In retrospect, this was exactly what happened in the United States about a hundred years ago. The country failed to protect foreign products until 1890 and then waited for another hundred years before it joined the most important treaty on international copyright.

What Exactly Is Intellectual Property?

Basically, intellectual property refers to brands, images and names used in business, symbols or logos, designs, artistic and literary works, and inventions. This is the definition of IP as suggested by the World Intellectual Property Organization. Intellectual property, as such, is protected by using trademarks, copyrights and patents. This is done to ensure that the earned financial rewards and name recognition is given to the creator. WIPO states that the IP system is designed to encourage an environment where innovation and creativity will flourish.

What’s The Reason For The Tariffs?

Robert Lighthizer, the current USTR has finished a seven month investigation on intellectual property in relation to China. The amount of $50 billion in tariffs is based on the losses in corporate revenues due to forced transfer of technologies and alleged IP theft of China from U.S. companies. According to some in the U.S. government, there is strong evidence that China is ignoring restrictions on foreign-ownership to force American firms to transfer technology to local businesses. There was additional findings that China conducted cyber-attacks to steal trade secrets and may be conducting tactics similar to Russia to interfere online with American elections.

While counterfeiting and piracy remain as China’s main concerns, forced transfer of technology and cyber-theft are two new forms of stealing foreign IP. Allegedly, China has been targeting American and other foreign businesses by imposing conditions and requirements if to operate in its territory. There is a level of legitimacy in this strategy compared to that of direct industrial espionage. This is helped by the cooperation of foreign companies who are willing to trade IP to gain access to the massive Chinese market.

Is Trump Starting A Trade War?

In his Twitter post on March 2, President Trump seems to suggest that the declaration of trade wars is “good and easy to win.” When the topic surfaced days before, the President was less aggressive saying that he didn’t think these new tariffs will spark a trade war. Trump’s concern with trade deficits is one of his consistent ideologies and can be tracked back to statements before his political career. Whether or not the US President is concerned with the protection of American jobs or the uplifting of US exporters, Trump has consistently favored protectionist policies.

In addition, the President’s base of voters in the Rust Belt of America seems to favor the withdrawal from Trans-Pacific Partnership and Nafta. But many U.S. business leaders are alarmed by the prospect of a trade war. They fear a slowing of economic growth and lower profits if America begins to be protective and its foreign trade partners start to retaliate.

In another confusing move, the President recently announced his plan to support Chinese telecommunications manufacturer, ZTE, from going under by offering access to US markets. Politicians on both sides of the aisle expressed concern over the potential use of these parts for nefarious activity.

Trump Is Using This Tool To Protect IP

The protection that President Trump is using now is Section 301 which was amended in 1984. This amendment gives the president the power to impose and authorize trade sanctions. He can use this power against any country that fails to provide adequate protection for intellectual property rights. But there are some who believe that trade sanction is a very blunt instrument which can only satisfy unusual situations.

For instance, they say that sanctions can only be imposed if a country really fails to protect property rights. If individuals or businesses engage in IP theft it becomes an individual transgression, and becomes a matter of enforcement of civil or criminal law.

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