President Trump’s approach to China goes beyond tariffs, hinting at extensive economic restrictions aimed at escalating the U.S.-China split. The administration has proposed limitations on investments and technology sales to China, reflecting concerns over national security. Recent actions include imposing a 10 percent tariff on all Chinese imports and expediting reviews of investments that could aid China’s military. While some officials argue these moves serve as negotiation tools, they could lead to increased trade tensions. Critics caution that the restrictions might face legal challenges and may not significantly alter the economic landscape, despite Trump’s aggressive stance.
President Trump’s assertive rhetoric regarding China primarily focuses on tariffs. However, a deeper analysis of his actions since assuming office indicates that the president is contemplating a broader range of economic sanctions against Beijing, potentially accelerating America’s separation from a key trading ally.
Thus far, the Trump administration has proposed broadening restrictions on investments flowing between the U.S. and China. Officials have been appointed who, citing national security concerns, are expected to advocate for further limitations on Chinese investments and technology exports to China. The administration has also implemented a 10 percent tariff on Chinese goods, described by Mr. Trump as an “opening salvo.”
Following years in which representatives from both parties gradually scaled back America’s economic engagement with China, Mr. Trump’s actions indicate a readiness to sever connections more decisively.
Samm Sacks, a senior fellow at Yale Law School’s Paul Tsai China Center, remarked that the investment memorandum issued by the administration on Friday sounds like “a call to complete the unfinished task of fully unwinding commercial ties with China.”
“Up to this point, pragmatists have succeeded in advocating for a more limited version of decoupling,” Ms. Sacks stated.
These statements could act as “a bargaining tool” for Mr. Trump to initiate discussions with Chinese leader Xi Jinping, according to Ms. Sacks. “However, if that collapses or fails to materialize — which seems likely — I see this as the framework to complete the decoupling process.”
The primary uncertainty in determining how far the United States will advance appears to rest with Mr. Trump himself. The president is keen on potentially negotiating with Mr. Xi, partly due to China’s lack of compliance with the terms of an agreement both leaders established in early 2020. Current and former advisers suggest that Mr. Trump adopts a more transactional approach to issues like Chinese investments compared to his more hawkish advisers, a stance that could encourage ongoing economic relations in return for a deal he perceives as favorable to the United States.
Mr. Trump has shown support for foreign investments in the U.S. that other Republicans view as national security risks, such as a proposal from Japan’s Nippon Steel to invest in U.S. Steel, or actions to save TikTok. During his campaign, Mr. Trump even stated he would welcome Chinese firms to establish automobile manufacturing facilities in the U.S. as long as they employed local workers.
“I’ll inform them that if they want to construct a plant in Michigan, Ohio, or South Carolina, they can — using American workers,” the president declared at a rally in Dayton, Ohio, last March.
During his initial term, Mr. Trump backed away from a strategy that would have severely impacted ZTE, a Chinese electronics manufacturer, after Mr. Xi facilitated a meeting between Mr. Trump and North Korea’s President Kim Jong-un.
Advisers to Mr. Trump indicate that the president might maintain pressure on Beijing, viewing it as a strategy to compel Chinese officials to make concessions. Consequently, trade tensions may escalate in the near future.
Having already imposed tariffs on China during his first term, Mr. Trump applied an additional 10 percent tariff on all Chinese imports this month, citing Beijing’s insufficient measures to curb drug trafficking into the United States. In response, China enacted its own tariffs on American goods, restricted the export of certain critical minerals, and initiated an antitrust investigation into Google.
A trade memorandum he signed on his first day in office instructed his advisers to explore other significant actions against China, including revoking the permanent normal trade relations status the U.S. granted China prior to its accession to the World Trade Organization. Furthermore, the Office of the United States Trade Representative announced recently that it would proceed with a trade case aimed at safeguarding the U.S. shipbuilding industry from Chinese competition.
The Trump administration is also discussing methods to tighten U.S. export controls, including addressing perceived loopholes in regulations regarding chips and chip-making equipment. Trump officials recently engaged in discussions with their Japanese and Dutch counterparts about collaborative efforts to prevent technology from reaching China, continuing the regular meetings initiated during the Biden administration, as per sources familiar with the discussions.
Recent personnel appointments reflect a shift toward a tougher approach regarding Chinese investments and technology sales. Within the Commerce Department, which spearheads efforts to limit technology sales to China, several longstanding employees, including Matthew S. Borman, a former deputy assistant secretary for export administration, have been removed in favor of new appointments. A nominee for assistant secretary of commerce, Landon Heid, previously advocated for stricter restrictions on sales to Chinese tech firms during his time at the State Department.
In terms of investment, Mr. Trump’s directive took the form of a presidential memorandum rather than an executive order, meaning it did not have an immediate impact on policy. It directed the Treasury Department and other agencies to establish new guidelines generally aimed at preventing U.S. companies and investors from making investments that would bolster China’s military advancements and safeguard against individuals connected to China “from acquiring critical American businesses and assets.”
The memorandum specified that the Trump administration would establish a “fast track process” for investments from U.S. allies, and the U.S. would welcome all “passive” investments from foreigners, involving no controlling stakes or managerial influence.
However, harsher limitations were proposed for certain foreign adversaries, such as China, which the administration claimed were systematically investing in the U.S. to gain technology, intellectual property, and leverage in key industries like agriculture, minerals, and shipping.
The memorandum indicated that the Trump administration would enhance the powers of the Committee on Foreign Investment in the United States (CFIUS), which assesses incoming investments for national security threats, to encompass “greenfield investment” — new facilities constructed from the ground up. It further directed CFIUS to cease using “mitigation” agreements, in which companies alter ownership or technology to mitigate national security worries and facilitate acquisitions.
Mr. Trump instructed his advisers to contemplate expanding restrictions on emerging technologies and to evaluate the imposition of limits on a wider variety of investments, including those from pension funds and university endowments. He also ordered reviews of the unique structures that Chinese companies typically employ to list on U.S. stock exchanges, which critics argue undermine ownership rights and protections for U.S. investors.
Critics assert that investment flows between the two nations have benefited the Chinese government and military, including by financing activities contrary to U.S. national security interests and facilitating the outflow of U.S. technology to China.
The Coalition for a Prosperous America, a trade organization advocating for protectionist policies, commended the presidential memorandum. In a statement, it claimed that investments from U.S. capital have allowed China “to finance its state-sponsored genocide, military aggression, surveillance apparatus, and other harmful endeavors.”
Roger Robinson Jr., a senior adviser to the group, described it as “a momentous breakthrough.”
“Hopefully, Congress will cooperate in outlawing numerous reckless and indefensible investment practices on Wall Street that benefit Chinese state-controlled corporate wrongdoers to our detriment,” Mr. Robinson added.
Nevertheless, some analysts cautioned that the economic ramifications might be limited and that the order could face legal challenges.
Ling Chen, a professor at the Johns Hopkins University School of Advanced International Studies in Washington, noted that Chinese investment in the U.S. has significantly declined since 2017. Consequently, she does not anticipate many changes or significant impacts on China.
“I do not foresee any surprising alterations in the overall trend,” she remarked.
Jim Secreto, a former advisor for investment security at the Treasury Department, expressed that some of the concepts outlined in the memorandum, such as reviews of greenfield projects, “exceed CFIUS’s current authorities and may be subject to judicial scrutiny.”
“The Trump administration should proceed cautiously to avoid implementation challenges that could ultimately jeopardize national security,” Mr. Secreto advised.
Alan Rappeport contributed reporting.