President Trump’s approach to China often spotlighted tariffs, but his policies suggest a broader strategy of economic restrictions aimed at challenging America’s relationship with Beijing. His administration has hinted at restricting U.S.-China investment flows and has introduced officials inclined to limit Chinese investments and technology exchanges due to national security concerns. Notably, Trump didn’t hesitate to slap a 10 percent tariff on Chinese goods, which he referred to as an “opening salvo.”
For years, officials on both sides of the political aisle have been gradually scaling back economic ties with China. However, Trump’s actions signify an intent to more aggressively redefine this relationship. According to Samm Sacks, a senior fellow at Yale Law School’s Paul Tsai China Center, the investment memorandum issued recently reflects a push to further unwind commercial relations with China.
Ms. Sacks notes that while more pragmatic voices have been advocating for a measured decoupling, the administration’s bold declarations could serve as a negotiation tactic with Chinese President Xi Jinping. If negotiations falter—a likely scenario, she suggests—these policies might lay the groundwork for a continued rift.
A key factor is President Trump’s stance. Despite his tough rhetoric, Trump seems open to striking a deal with Xi, partly due to China’s failure to adhere to a past agreement. Those familiar with Trump’s approach describe him as more transactional, seeking economic ties that benefit the U.S., which might lead to continued cooperation under favorable terms.
On a recent occasion, Trump praised his rapport with Xi and expressed approval for Chinese investments in America. “We want them to come in and invest,” he stated from the Oval Office, emphasizing the mutual financial benefits for both nations.
Trump added, “We’re poised for a positive relationship with China, but we won’t be exploited.” During his campaign, he showcased willingness to welcome foreign investments that some Republicans deemed security risks, provided they contribute economically, such as foreign firms creating jobs within the U.S.
In his first term, Trump softened a stance against ZTE, a Chinese tech company, after diplomatic intervention by Xi, aiming for breakthroughs in sensitive areas like North Korea. His advisors believe increasing pressure on Beijing may coerce concessions, potentially escalating trade tensions further.
Infamously, Trump increased tariffs on Chinese goods this month, citing China’s inaction on the drug trafficking issue. China’s counter-move included tariffs on American goods and additional regulatory measures affecting U.S. companies. Influenced by earlier trade policy directives, Trump’s team is considering revoking China’s favorable trade status granted under WTO guidelines.
Amid these trade changes, Trump’s administration seeks stricter export controls, closing loopholes in chip technology regulations. International cooperation discussions with Japan and the Netherlands aim to limit technology access, continuing initiatives under Biden.
Personnel changes demonstrate a shift toward tighter control over Chinese business dealings. Inside the Commerce Department, new appointees reflect a tougher stance on technology sales. Landon Heid, a nominee known for advocating restrictive measures, steps into a pivotal role at the Department of Commerce.
In terms of investments, Trump’s memorandum, though not an executive order, signals a strategic stance. Suggested policies seek to block investments that could fortify China’s military edge or enable buying critical American sectors. It highlights a “fast track process” for allies, reserving stringent measures for adversaries perceived to undermine U.S. technological and strategic advantages.
The memorandum proposes broadening the scope of CFIUS to review fresh investment projects, halting reliance on mitigation agreements that previously allowed potentially risky foreign investments. Discussions on extending restrictions to emergent tech sectors and reevaluating Chinese companies’ methods of listing on U.S. exchanges are also underway.
Critiques argue that these financial channels assist Chinese government initiatives, potentially jeopardizing U.S. security. The Coalition for a Prosperous America, advocating protectionism, hailed the memorandum as a historic move curbing harmful investment practices.
Yet, not everyone sees dramatic shifts ahead. Ling Chen from Johns Hopkins University observes that Chinese investments have already dwindled since 2017. Legal hurdles may limit the reach of these proposals, as noted by Jim Secreto, a former Treasury counselor, warning against overextending CFIUS’s remit.
Trump’s administration, navigating between assertive policy and potential legal battles, must tread carefully to strengthen national security without unintended consequences.
