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View from Washington: Trump’s China tariffs on target for IP but is the timing off?

Technology likes the President's tough talk on intellectual property but fears he cannot back it up.

It is easy to assume that the US technology community opposes everything that Donald Trump does as President. Easy but wrong.

A specific case in point is Trump’s decision to play (or try to play) hardball with China over trade, particularly when it comes to intellectual property (IP). Using his beloved Twitter account, the President accused China of $300bn in IP theft on Wednesday (April 4) as justification for his controversial package of trade tariffs.

US business leaders believe that previous administrations have failed to confront China in any meaningful way over IP and that the situation is now approaching breaking point. They like this talk.

Beijing has recently been placing yet further conditions on the operation of foreign businesses in China – in the most recent survey by the American Chamber of Commerce in China (AmCham), 75% of US companies said they felt less welcome than before. In this context, many US executives admit to sharing Trump’s frustrations, as that pressure includes specific demands for them to share even more IP with local partners.

But it is a tension that already goes back many decades.

At the same time, AmCham chairman William Zarit has quickly emerged as one of the leading figures urging caution, calling for the two sides to enter “serious negotiation” before enacting the proposed tariffs.

The problem is not that Trump has picked IP as a battleground. Rather, it is that the President has chosen it before he has much in his arsenal with which to genuinely confront Beijing.

It is noticeable that while the President’s initial $50bn list of tariff targets has a largely economic feel – aiming, for example, at Chinese imports competing with ailing US industries such as steel and aluminium – China’s initial response has been more political.

It has, for example, threatened to levy tariffs on soya beans – a product largely grown in Trump-voting regions – and on aircraft, where China has a ready-and-willing second source to Boeing in Airbus.

Generally, as Beijing has looked to spread its ‘soft power’ globally, notably in Africa and along the One Belt One Road corridor to Europe and elsewhere, it has progressively sought out and secured second sources for materials and goods where the US has historically been a leading supplier.

So while Trump has threatened to add a further $100bn-worth of tariffs across other categories, the message from the Chinese leadership is that it believes it holds the better cards. In a statement today (April 6) in Beijing from the Ministry of Commerce, China pledged to fight back “at any cost”.

Despite the increasingly bellicose rhetoric from both sides, the general view among US players in China is that calmer heads will prevail and that Chairman Zarit will get his “serious” talks. On the technology side, however, a further hope remains that the current rhetoric on IP will translate into some tough talking around the table.

 

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