Businesses Race to Washington to Sway Trump on China Tariffs

“I’m angry, I’m frustrated, and honestly, I’m scared,” Mary Buchzeiger, who runs an automotive supply business in Michigan, said of the Trump administration’s proposed tariffs.

WASHINGTON — Mary Buchzeiger describes herself as a proud Republican who was drawn to President Trump’s business-friendly philosophy. But the president’s plan to impose sweeping tariffs on $50 billion of products from China now threatens to cripple an automotive supply business in Michigan that her father began and that she has spent years building.

“I’m angry, I’m frustrated, and honestly, I’m scared,” Ms. Buchzeiger said on Tuesday morning, as she joined dozens of other vulnerable entrepreneurs, as well as supporters of the Trump administration’s trade agenda, at a public hearing about the tariffs. “Scared that my president is about to make a terrible mistake.”

Over the next three days, business owners, trade groups and other industry representatives will testify before United States trade officials about the administration’s plan to impose tariffs on more than 1,300 Chinese imports, including flat-screen TVs, steel and medical devices, and as it threatens levies on an additional $100 billion of Chinese goods. For business owners like Ms. Buchzeiger, the hearings are a last-ditch attempt to shift the White House away from punitive trade measures that are putting American companies at risk, as the two countries engage in tit-for-tat tariffs that could hurt businesses dependent on access to China.

The hearings come at a moment of brinkmanship and negotiation, with the world’s two largest economies repeatedly veering toward a trade war only to reverse course and edge instead toward diplomatic discussions.



How China Became Trump’s Trade Nemesis

China’s explosive rise was a shock to the global trading system. For decades, Western economies like the United States have struggled with the growth of this economic powerhouse.

“If you look at what’s happening with trade in China, it hasn’t been fair for many, many years.” When President Trump rails against China, he says things like, “Our country is being taken advantage of,” or, “We lost years ago by presidents and others allowing this to happen.” He’s probably referring to the past four decades, when China has grown faster than any major economy in history and gone from a poor, developing country to an economic powerhouse that is challenging America’s spot at the top of the international food chain. “Its emergence as a global power was so sharp and so extreme, faster than the world can handle, in some ways faster than China can handle.” The U.S. and other Western nations kick-started much of China’s rise by opening up trade. What they haven’t figured out is how to get this fundamentally different economic system to play by free market rules. A pivotal moment came in 2001 after 15 years of negotiations. China joined the World Trade Organization, which sets the rules for free and fair trade between member countries. “All of the countries that were in the club at the time put enormous demands on China for what they needed to do.” The Chinese committed to sharply lower tariffs and reduced some of the government’s role in how business gets done. But they argued then, as they still do now, that China is a developing country and so should be held to less stringent free trade standards. The hope was that these first steps would lead to even more sweeping changes. “Why did we assume that? The experience of communism was through the lens of the Soviet Union and its satellite states, which was ultimately not a success. And so the presumption was, China’s going to want to become like us, more market oriented.” “After China joined the W.T.O. in 2001, you saw this enormous surge of Chinese exports to everywhere in the world, and to the United States in particular.” “They were kind of an elephant hiding behind mice with respect to other countries in global trade negotiations at the time.” The U.S. and other countries complained that China was not opening its markets enough, and keeping the value of its currency artificially low to make Chinese exports more attractive. “China has been making great strides using tools that are really not acceptable under the global trade system.” China has continued to operate as a centrally planned economy. The government owns, influences or subsidizes major industries, giving them an artificial competitive edge. There are heavy restrictions on foreign investment, and foreign companies are pressured to share their technologies. “China has become more market oriented, but dating back to probably 2007, 2008, I think it was recognized that China wasn’t on the path to become more like us. And so then countries began to think about, well, what do we do instead?” “Some view the rise of Asia-Pacific with suspicion and fear. America doesn’t.” Enter the Trans-Pacific Partnership, initiated by Bush, signed by Obama. “When implemented, It won’t just boost trade and support jobs in our 12 countries. It will help set stronger rules for trade across the Asia-Pacific.” Put less politely, It was also supposed to be a bulwark to China’s growing economic power. “The idea was that China would want to join this great trading pact, and so they would have this incentive to reform their economy.” “This is the one that President Trump ripped up on his third day in office.” “The first one is withdrawal of the United States from the Trans-Pacific Partnership.” “I had seen the erosion of popular and congressional support for trade for many years. But I’d never seen anything like Donald Trump.” “Our founding fathers understood trade much better than our current politicians, believe me.” Trade is generally accepted by economists as win-win for countries on the whole. But Trump says that China is winning and the U.S. is losing. “He and people in his administration argue that past approaches to dealing with China haven’t worked. It’s not actually that profitable to negotiate with them. We need to focus on this much bigger trade measure, and then we can really hit them with a very aggressive, forceful action.” “He seems intent on generating a moment of crisis.” “We put a $50 billion tariff on, then we put a $100 billion tariff on. And you know at a certain point, they run out of bullets.” But dynamics have changed. Today, China sees its economy as strong enough to withstand almost anything the U.S. can throw at it.

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China’s explosive rise was a shock to the global trading system. For decades, Western economies like the United States have struggled with the growth of this economic powerhouse.CreditCredit...Johannes Eisele/Agence France-Presse — Getty Images

The economic relationship now hinges on trade talks happening this week between top Trump administration officials and Liu He, a Chinese vice premier who arrived in Washington on Tuesday. Chinese negotiators and global businesses remain uncertain about whether the United States will move ahead with its plan to impose hefty tariffs and investment restrictions on China in an effort to pressure economic reforms — or whether Mr. Trump will seek to avoid a damaging trade war by cutting a quick deal.

Mr. Trump appeared to soften his stance on China in a series of tweets this week, as he emphasized his friendship with the Chinese president, Xi Jinping, and said the United States would consider easing penalties on ZTE, a Chinese telecom firm. In a tweet on Tuesday, Mr. Trump said “trade negotiations are continuing with China” and to “stay tuned!”

“I think the time is right for China to make changes they should have been making for the past 15 to 20 years,” Larry Kudlow, the president’s top economic adviser, said at an event in Washington on Tuesday morning.

The uncertainty over the administration’s approach has left global businesses that compete or cooperate with China at turns hopeful and despairing. Looming tariffs on a wide variety of goods from China are just one source of unpredictability for American companies: The administration is also in the midst of finalizing tariffs on steel and aluminum imports and trying to rework the North American Free Trade Agreement, which has been mired in disagreements among Canada, Mexico and the United States.

The array of companies testifying in a hushed hearing room in Washington on Tuesday included TV makers, auto parts suppliers, steel companies and retailers. Some commended the planned 25 percent tariffs on Chinese imports and others blasted them, but all agreed on the potential for the Trump administration’s actions to irrevocably alter the course of their businesses.

Those testifying on Tuesday morning included executives from the solar cell and module manufacturer SolarWorld Americas, the wind turbine maker American Superconductor Corporation and the United States Steel Corporation, all companies that say they have had intellectual property stolen by Chinese actors and have assisted in the Trump administration’s investigation into unfair Chinese trade practices. In March, the United States trade representative determined that the Chinese had violated American intellectual property, a finding that gave Mr. Trump the authority to impose tariffs and other restrictions.

Many business owners pleaded with the administration to be even tougher on China and help protect their businesses against foreign competition. Cory Watkins, the president of Schumacher Electric, which manufactures car battery chargers and jump starters primarily in North America, asked the administration to include more of the company’s finished products in the tariff list.

Mr. Watkins said the company had learned in the last few weeks that one of its biggest customers had signed a contract with a Chinese manufacturer that Schumacher Electric has sued for stealing its intellectual property. Without the tariff protections, Mr. Watkins said, “we still run the risk of the very problem we’re facing today, which is Chinese companies taking our intellectual property, copying it and selling it to our own customers.”

Companies caught in the tariffs cross-fire, like the electronics retailer Best Buy and the TV streaming device maker Roku, protested that they would face higher prices to import products from China and that those costs would ultimately be passed on to American consumers. Michelle Erickson Jones, a Montana farmer and a member of the trade lobbying group Farmers for Free Trade, complained that trade tensions were already costing American farmers, who were facing canceled orders of soybeans and wine and seeing perishable shipments held up in Chinese ports.

Representatives from Chinese business groups argued that the proposed tariffs were arbitrary, were inconsistent with World Trade Organization rules and put millions of American jobs tied to trade with China at risk. “Should the U.S. implement the proposed action, it will lead to nothing but confrontation between the two countries,” said Jian Tan, a representative of the China Chamber of International Commerce.

The Trump administration has said it devised its tariff list to remove goods that were vital to American consumers. But in the process, many economists say, the administration ended up targeting the imported parts and machinery that businesses depend on to run American-based operations.

Ms. Buchzeiger’s company, Lucerne International, used to source more products from within the United States. But when the financial crisis hit, her American suppliers started to fold, and the company had to look abroad. The company supplies 28 parts for the Jeep Wrangler, which Lucerne sources from seven manufacturing facilities in China, she said.

With tariffs looming, Ms. Buchzeiger, who expanded the company from six employees in 2008 to nearly 50 today, has frozen hiring and set aside plans to find new engineers. She estimates the tariffs would cost her company $7.5 million of its nearly $40 million in annual sales and put her out of business in less than three months.

“I would be shipping money with the parts to my customers every day,” she said. “And I ship hundreds of thousands of parts a week.”

Ms. Buchzeiger fully supports the idea of bringing manufacturing back to the United States, and has a long-term plan to set up a manufacturing plant in Flint, Mich., where she was born. But “it takes millions of dollars of investment to open up a plant, and it takes time,” she said. “I can’t react in less than three weeks to some arbitrary tariffs that are slapped on our products. And being able to move production of 7.8 million parts overnight, that’s not possible.”

Instead, she said, putting tariffs on Chinese products would simply force her to look for suppliers in other low-cost countries, including Thailand, Malaysia and Vietnam. “The only thing it’s going to do is move business out of Michigan to another country,” she said.

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