The US just fired the first shot in a trade war with China

Donald Trump Xi Jinping
US President Donald Trump and Chinese President Xi Jinping, right, arrive for a meeting on the sidelines of the G-20 Summit in Hamburg, Germany, Saturday, July 8, 2017. Saul Loeb/Pool Photo via AP

The US has initiated an investigation
n into China’s theft of US intellectual property (IP) using Section 301
US Trade Act of 1974.
That may sound like a bunch of jargon, but what it boils down to is that the US just fired the first shot in a trade war with China.

“On Monday, President Trump instructed me to look into Chinese laws, policies, and practices which may be harming American intellectual property rights, innovation, or technology development,” said Ambassador Robert Lighthizer in a statement on the US Trade Representative website.

“After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation. I notified the President that today I am beginning an investigation under Section 301 of the Trade Act of 1974.”

China sees the use of Section 301 as an act of aggression because it allows the president of the United States to act against the Chinese economy without consulting the World Trade Organisation. China has been a member of the WTO since 2001. The use of Section 301 fell out of fashion around the same time. US leaders didn’t see the point of using it anymore because the WTO’s framework had more legitimacy, and even allies were complaining about its use.

China has been warning the Trump administration against bypassing the WTO since January. Earlier this week Chinese state media was alive with condemnation for even the thought of activating section 301.

“We urge the US side to respect the facts and act prudently. If US ignores the facts and disrespects multilateral trade rules, thus jeopardizing the two nations’ trading ties, China will not sit on its hands and will take all appropriate measures to protect its own legitimate rights,” said a spokesperson for China’s Ministry of Commerce on Tuesday.

More on this to come…