The move seems to be the result of both the Donald Trump White House’s growing discontent with Chinese restrictions on US businesses and Beijing’s unwillingness to rein in a more belligerent North Korea. Earlier this week, US commerce secretary Wilbur Ross, in the Wall Street Journal (paywall), blasted China and the EU as “protectionists dressed in free-market clothing.” He also criticized the World Trade Organization for treating as “evidence of protectionism” an increase in trade enforcement cases brought by the US. “Apparently, the possibility never occurs to the WTO that there are more trade cases because there are more trade abuses,” he wrote.
Trump could be merely using US-China trade as a bargaining chip for bilateral negotiations on other issues–for example, to put pressure on Beijing to confront Pyongyang. But if any trade sanctions are put in place against it, China will likely respond by launching its own retaliations against American businesses. That defines a trade war.
Ironically, Trump might not need to take this route had he not pulled the US out of the Trans-Pacific Partnership (TPP) on his third day in office. There is reason to think China would have wanted eventually to join the trade deal, which would have forced it to crack down on such things as IP theft.
But absent the TPP, there are two US laws that Trump is reportedly considering invoking against China. Both enable the president to act unilaterally without approval from the Congress or the WTO—and both are rarely used against the US’s major trade partners.
Section 301 of the Trade Act of 1974
This section (pdf, p.64) authorizes the US government to investigate foreign government acts or policies which “burden, restrict, or discriminate against United States commerce.” The president can then act unilaterally to impose tariffs or other trade restrictions in retaliation.
According to Reuters’ sources, Trump is expected to issue a presidential memorandum on Chinese theft of American IP in the coming days, and US Trade Representative Robert Lighthizer will then start an investigation against China under Section 301.
Section 301 investigations have not resulted in any trade sanctions since the WTO was set up in 1995, Reuters noted. It added that the section was used to impose tariffs against Japanese motorcycles and steel in the 1980s.
International Emergency Economic Powers Act
This 1977 law (pdf, p.2) is another option currently under discussion, according to the Wall Street Journal (paywall). It gives the president wide powers to regulate all forms of international commerce to deal with an “unusual and extraordinary threat” to the national security, foreign policy, or economy of the US. The act can be invoked only if a “national emergency” has been declared under the National Emergencies Act.
Previous US administrations have invoked the IEEPA to impose sanctions against hostile foreign governments or individuals in countries such as Syria and Somalia. In the past, US courts have never rejected (pdf, p.13) presidential declarations of a “national emergency.”
By Zheping Huang