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China Center Newsletter

Welcome to The Conference Board China Center Newsletter for March 2018. You are receiving this based on your past engagement with us on this topic.

In February we learned that the US–China trade deficit touched an all-time high in 2017, reaching $375.2 billion (up from $347 billion in 2016). The deterioration played out despite a relatively weak year for the US dollar, which in theory should have helped US exports by reducing the cost of American goods for consumers overseas. The Conference Board has pointed out in the past that traditional trade data does not sufficiently describe the economic relationship between the two countries, but nonetheless these high-profile topline figures are likely to accelerate the Trump administration’s protectionist agenda.

Already this year the US has slapped steep tariffs on Chinese solar panels and washing machines; announced anti-dumping duties on Chinese pipe fittings; frozen all future inbound investment by HNA Group; tightened the informal blacklisting of Huawei (leading AT&T to scrap a high-profile partnering initiative at the last moment); blocked Chongqing Casin Enterprise Group from acquiring the Chicago Stock Exchange; expanded the list of Chinese companies subject to secondary sanctions for their alleged business ties with North Korea; and, via the Commerce Department’s Section 232 investigation, hinted that significant tariffs on Chinese steel and aluminum will likely be forthcoming.

Meanwhile, in just the past few weeks China has responded by taking the US to court in the WTO over the solar and washing machine tariffs, opening an anti-dumping and anti-subsidy investigation into sorghum imports, and announcing that it has found evidence of dumping in styrene (a plastics building block used in foam packaging, Styrofoam, etc.). The drumbeats of trade war are pounding, even if so far we’ve only seen minor skirmishes.

As we highlight below, however, all of this may be minor for China-engaged MNCs compared to a seismic shift working its way through Congress. The reform and empowerment of the Committee on Foreign Investment in the United States (CFIUS) has the potential to dramatically disrupt many traditional partnership approaches MNCs have been using in China for a generation—and it’s not at all clear to what degree the US business community in China (or Beijing itself) is aware of this impending paradigm shift.

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