- The US will not allow Alibaba purchase US money transfer company, MoneyGram, and China’s not happy about it.
- This spat kicks off what could be a contentious few months for US-China economic relations.
- In the coming months, The White House has to make a bunch of decisions about tariffs on solar panels, washing machines and more that could make relations worse.
And by the sounds of it, this is not sitting well with the Chinese government. A state-media editorial following the announcement accused the US of starting an already contentious year for trade on an aggressive footing, and taking a “hawkish turn” which became “ear-piercing” in December after the Trump administration made economic aggression against China a major part of its national security platform.
“China and the United States are about to ride a bumpy journey in trade in 2018 if the U.S. government goes it own way, and retaliatory measures by China could be on the table,” state-run Xinhua warned.
Indeed, this spat raises the curtain on numerous delicate negotiations and key decisions coming for US-China relations over the next few weeks. A fight over Alibaba, a company that means a lot to China’s national pride, wasn’t even on the table.
But things have changed.
First the spat at hand. To purchase MoneyGram, a US company, Alibaba had to do what dozens of companies have done before it – get approval from the Treasury Department’s Committee on Foreign Investment in the United States, CIFIUS.
CIFIUS determines whether or not the sale of a company would have a material impact on national security or the US economy. During the Trump administration, the definition of “national security” has been expanded to include everything from semiconductors to now, money-transfer companies. Even companies belonging to China’s golden business billionaire, Jack Ma.
In fact, the Trump administration has been making companies reapply, and put up a bunch of hurdles for people that never expected them. One of them is former White House press secretary Anthony Scaramucci. The sale of his financial firm, SkyBridge, is still languishing in wait for approval for a sale to beleaguered Chinese conglomerate HNA.
It’s not looking good.
At the beginning of last year,beginning of last year, China laid out a bunch of sacrosanct national security and trade issues to the Trump administration. CFIUS was not among them.
Flex if you want to
The issues that were (and have been) on China’s radar were more than enough to strain relations without an Alibaba insult.
“In the last 30 days of 2017, the U.S. government launched a Section 301 investigation into Chinese intellectual property and technology transfer, self-initiated probes into Chinese-made aluminium products, and rejected China’s market economy status at the World Trade Organisation,” the Xinhua editorial said.
Talk to anyone in Washington working on trade and they will tell you that this stuff – resurrecting arcane, aggressive trade laws and and ignoring the World Trade Organisation whenever convenient – makes Trump happy. He genuinely believes in disrupting the global trade order and punishing China. That makes what’s coming over the next few weeks that much more dangerous.
In January, Trump has to decide whether or not to put up tariffs against foreign solar panels and washing machines.
After that he must decide whether or not to slap tarriffs on foreign steel and aluminium, declaring any threat to US companies in those industries a threat to US national security. This won’t just upset the Chinese, expect the Europeans, Brazilians and Canadians to have a lot to say about it too.
Inside the White House, Axios reports, trade hawks like US Trade Representative Robert Lighthizer and adviser Peter Navarro have the president’s heart and ear.
But Treasury Secretary Steve Mnuchin and adviser Gary Cohn are trying to tell Trump that aggressive action against China could hurt the stock market (of which Trump is so proud) and erase the gains made by the GOP’s tax cut.