Senior White House officials are quietly preparing to confront China over what they consider unfair practices in the auto industry. It's a move that could profoundly disrupt relations between the superpowers, reports Jonathan Swan.
According to Swan, expect the issue to pop in President Trump's talks next month with China's Xi Jinping.
- When U.S. automakers sell in China, they are met with import tariffs of 25%. That's why 96% of the 27.5 million vehicles sold in China last year were built there.
- When U.S. automakers like GM build in China, they are required by law to form joint ventures with Chinese companies. Those Chinese companies must own 50% or more of the venture.
- By contrast, the U.S. imposes tariffs of just 2.5% and lets foreign car companies own their entire U.S.-based operations.
- U.S. companies have swallowed these rules since the '90s because the Chinese market is so lucrative. But Trump and his nationalist-minded advisers — Steve Bannon, Stephen Miller and Peter Navarro — find the status quo unacceptable.
In other words, because China has dumb, standard-of-living lowering trade policies, Trump may implement similar policies in the United States against China.
Unilateral free trade works. It is the best policy, regardless of what foreign nations do.