WASHINGTON — China appears poised to impose penalties on a major U.S. auto manufacturer for “monopolistic behavior,” in the latest tit-for-tat between the two countries.
The threat of penalty from China comes as the war of words between President-elect Donald Trump and China has escalated in recent weeks and follows a long history of friction between the two countries over thorny trade issues.
According to reports in the China Daily newspaper, China will soon issue a penalty against an unnamed U.S. automaker. Speculation swirled Wednesday about whether a company like General Motors or Ford was being targeted by China on allegations of price-fixing.
Zhang Handong, director of China’s National Development and Reform Commission’s price supervision bureau, was quoted in the paper as saying the penalty will soon be imposed for “impeding competition.”
Trump met with his Commerce Secretary nominee, Wilbur Ross, on Wednesday and the news about a forthcoming penalty was likely to be front and center.
But Trump does not take office until he is sworn in on Jan. 20. The Obama administration, which has filed several trade cases against China, still leads the formal diplomatic communication with China.
“Obviously, we are aware of the news reports,” a Trump spokesman said on a call with reporters. “I imagine that will be a topic of conversation when the president-elect and Mr. Ross get together later today. I do think the president-elect has made very clear that he is going to get out there and fight for American companies and American jobs.”
Trump has railed against China for months, repeatedly saying he plans to label the country a currency manipulator and impose tariffs of up to 45 percent on Chinese imports.
The fashion industry has significant exposure to retaliatory action taken on the part of China. Retailers and apparel brands imported $43.2 billion worth of textiles and apparel to the U.S. from China in 2015.
In the latest dustup, Trump drew a sharp rebuke from China’s state-run Global Times newspaper after he made comments on “Fox News Sunday” over the weekend suggesting that the U.S. might not be bound to a “one-China” policy that considers Taiwan as part of China and proclaiming, “I don’t want China dictating to me.”
The Obama administration could also have further provoked the friction in the U.S.-China relationship on Monday, according to some trade experts.
China filed a complaint at the World Trade Organization against the U.S. and European Union, challenging the methods used in calculating antidumping measures against its exports. China’s WTO case came as a 15-year clause in China’s accession protocol agreement allowing member countries to use “surrogate” prices from third countries in antidumping cases expired. The country is now seeking to be treated as a market economy.
But a U.S. trade official speaking on anonymity explicitly stated in response that China has not made the reforms necessary to operate on market principles and the U.S. will therefore continue to use “surrogate” prices.
Trade friction has been a perennial part of U.S.-China relations. The Obama Administration has brought 11 trade enforcement challenges against China at the WTO out of a total of 20, while scores of U.S. steel and aluminum companies have filed antidumping cases against China over the past decade.
“The Obama administration worked hard and with success to tamp down trade frictions,” said Phillip Swagel, a professor of international economic policy at the University of Maryland. “They undertook some trade actions, but for specific reasons such as developments in an industry (tires, steel), while taking care to avoid having geopolitical frictions such as in the South China Seas spill over to affect the economic relationship.”
He said one criticism could be made of the Obama administration in that it has been “too conciliatory” in not challenging China.
“But the approach has resulted in a smooth relationship,” Swagel added. “This looks to be changing — and from China’s perspective, everything will be on the table including economic moves in response to what they see as geopolitical provocations. We are not in a trade war, but friction will follow friction. We are seeing just the beginning of that dynamic — it will get worse before it gets better.”
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said he believes China’s apparent intent to impose a penalty on GM is the “opening salvo of a tit-for-tat trade retaliation.”
Hufbauer said Trump’s vow to label China a currency manipulator and the Obama administration’s refusal to name it a market economy have antagonized China.
“Whether it erupts into what one would call a full-scale trade war is still an open question, but this tit-for-tat, this ‘I’ll hit you, you hit me,’ seems almost certain and more of it will go on,” Hufbauer said.
Hufbauer said as long as the friction remains a “tit-for-tat” on specific issues or industries, it will not have a broader economic impact.
“But it will poison the atmosphere for trade negotiations, although it has already been pretty poisoned,” he said. “With this kind of atmosphere, no one will be willing to launch new trade negotiations. The big impact numerically and quantitatively is there will be no new liberalization of any size for quite some time. That’s the big loss.”