Minor U.S. Trade Sanctions on China Possible, Experts Say

     BEIJING (MNI) - A possible investigation that could lead to trade sanctions

on China by the U.S. may be postponed amid the two countries' stronger

cooperation on Korean peninsula denuclearization and objections from the U.S.

business community, although some China trade experts interviewed by MNI believe

small-scale sanctions are possible in the future.

     As one of the most interconnected bilateral trading partnerships, the

U.S.-China relationship seems to have cooled slightly, and analysts interviewed

by MNI said conflicts may continue to emerge between the two, especially with

President Donald Trump in the White House.

     "Trump was a businessman and his policies tend to be negotiable, so they

usually could change fast and with uncertainties," Liu Yingkui, director of the

China Council for the Promotion of International Trade, said in an interview

with MNI on Monday. "He wants to bargain, but may not take real actions."

     On Saturday, 15 United Nations Security Council members voted unanimously

on a U.S.-drafted plan to place sanctions on North Korea. Trump applauded the

votes from China and Russia and tweeted that the sanctions would be "the single

largest economic sanctions ever on North Korea," with "a very big financial

impact."

     The Security Council resolution would ban exports of coal, iron, iron ore,

lead, lead ore and seafood from North Korea, which is expected to reduce its

exports by around $1 billion annually -- equal to a third of North Korea's

annual export revenues. The sanction plan also prohibits countries from

increasing the number of North Koreans working abroad.

     The announced sanctions came a few days after the press reported the Trump

administration was considering a plan to investigate what it said was China's

"unfair" trade practices.

     The investigation was to focus on China's intellectual property violations

and its forced technology transfers from U.S. companies as a requirement to do

business in China. It was regarded as a response to China's lack of effort in

reining in North Korea's nuclear weapons ambitions, and could have lead to

sanctions on some Chinese companies and sectors.

     But Politico cited unidentified sources as saying that the investigation

was postponed, with no date rescheduled. CNBC and the South China Morning Post

also reported that several U.S. government bodies, as well as various business

sectors, including the agricultural industry, had objected to the plan. 

     The investigation would have been conducted under Section 301 of the Trade

Act of 1974, which allows the president to take unilateral sanctions such as

increasing tariffs and placing restrictions on specific Chinese sectors.

     "These kinds of trade conflicts are normal," Liu said. He said a trade war

is not likely to happen between China and the U.S. because it does not fit into

their "global strategies," adding that it would end up hurting both countries,

with China likely to retaliate as it has done in past instances.

     Liu called for equal dialogues between the two countries.

     "The huge trade imbalance has existed for a long time," Liu said. "And it

is a result of the mutual complement of industrial structures in China and the

U.S. The U.S. should not use this as an excuse to impose unfair trade

sanctions."

     But Yu Miaojie, economics professor at Peking University's National School

of Development, who specializes in international trade and China's economic

development, told MNI that Trump is eventually likely to create sanctions under

Section 301.

     "Sooner or later, the U.S. would impose partial sanctions on its trade with

China," Yu said. "I don't think it's related to the North Korean problem. Even

if [the North Korea problem] did not exist, Trump would take some action when he

sees a trade deficit, and it fits into his usual way of doing things."

     Yu said Trump's possible sanctions on China would be "purely economic

measures" and would be similar to sanctions he put on Canada in April --

imposing stiff tariffs of up to 24% on Canadian softwood lumber.

     As a reaction to China's huge trade surplus and the Trump administration's

dissatisfaction with the results of the 100-day action plan between the two

sides, Trump's possible sanctions on China trade would be unfair and

unreasonable, Yu said, adding that China has not aimed for a huge trade surplus

as it does not necessarily benefit the country.

     "A trade deficit means a nation borrows money from another country with a

trade surplus, just like ordinary people borrow money using their credit card

for consumption," Yu said. The U.S.-China trade imbalance, he said, results from

different strengths and the different economic structures of the two countries.

     As to Trump's tweet on July 29 claiming China does "nothing" in achieving

denuclearization of North Korea and "China could easily solve this problem," Liu

said Trump's attempted connection between the Korean peninsula issue with

U.S.-China trade is "unreasonable."

     China Ministry of Commerce Spokesman Gao Feng stressed the importance of

the U.S.-China trade partnership last Thursday at a press briefing. He said that

China is willing to continue to cooperate and work with the U.S., but that any

World Trade Organization member should obey WTO rules in its trade actions. 

     But whether or not trade sanctions are on the horizon, "U.S.-China trade is

not in for smooth sailing," Yu said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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