Hi, China Watchers. Today we look at draft U.S. legislation that would impose sky-high tariffs on Chinese imports and detail Texas' efforts to confront a perceived China threat. And we profile a book that argues that China's support for Russia's war on Ukraine has strengthened "solidarity" between Taiwan and the European Union.
Let's get to it. — Phelim.
GOP plots "middle finger to the WTO" China tariff plan
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Beijing may start to look back fondly at the time President-elect Donald Trump threatened tariffs of up to 60 percent on Chinese imports.
Rep. John Moolenaar (R-Mich.), chair of the House Select Committee on China, introduced legislation last week that would strip China of its Most Favored Nation status, a move that would open the door to tariffs of up to 100 percent. (A companion bill was introduced in the Senate legislation in September by Republican Sens. Marco Rubio (Fla.), Josh Hawley (Mo.) and Tom Cotton of Arkansas). The Most Favored Nation Status — which was part of the process of admitting China into the World Trade Organization in 2001 — commits WTO members to a schedule of mutual tariff reductions and expanded market access.
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A growing chorus. The U.S.-China Economic and Security Review Commission also recommended in a report released Tuesday that Congress repeal China's Most Favored Nation status (officially called Permanent Normal Trade Relations) to give the U.S. "more leverage" in its trade relationship with China. There's a precedent — the Biden administration revoked Russia's PNTR in 2022 after its full-scale invasion of Ukraine.
A treat for Trump. Moolenar sees a greater chance of the legislation passing after Trump takes office in January. The legislation is about "starting a conversation that will be influenced by the approach of the incoming administration," said Moolenaar spokesperson William Poplawski. There may be growing bipartisan support for that discussion. "When I talk to folks on both sides of the aisle on Capitol Hill, it seems political support for revoking China’s PNTR is building," said Peter Harrell, former senior director for international economics in the Biden administration.
Risky business. Some Dems say it's too risky. Higher tariffs would "trigger retaliatory measures against our exporters, such as our farmers," said Rep. Raja Krishnamoorthi (D-Ill.), ranking member of the House Select Committee on China. U.S. importers are also recoiling. Ending PNTR will end up "driving up prices, eliminating hundreds of thousands of jobs, and making it harder for American companies to compete globally," said Craig Allen, president of the trade group the U.S.-China Business Council.
No pain, no gain. Moolenaar is undeterred. Lawmakers shouldn't allow "the fear of what China might do stop us from rebuilding U.S. manufacturing capacity … and enriching our economy," Moolenaar said. The legislation could be a step toward the decoupling of the U.S. and Chinese economies that Trump has backed.
Goodbye WTO. Revoking PNTR would be a blow to U.S. standing in the WTO and its system of rules aimed to ensure fair trade between all members.
It would be the equivalent of "the Trump trade team giving a big middle finger to the WTO," said Christine McDaniel, a former Treasury Department deputy assistant secretary in the George W. Bush administration.
End of an era. PNTR's demise would also end selective sanctions on Chinese imports — including the 301 tariffs imposed by the first Trump administration and extended by President Joe Biden — to prod Beijing to curtail unfair trade practices.
Moolenaar's bill is a recognition that hopes that China would become "more market-oriented" through free trade have failed, said Greta Peisch, former general counsel of the Office of the United States Trade Representative and currently a partner at Wiley Law.
TRANSLATING WASHINGTON
— SENATOR WARNS ON MUSK'S CHINA TIES: Sen. Richard Blumenthal (D-Conn.), chair of the Senate Judiciary Committee's Subcommittee on Privacy, Technology and the Law, warned Tuesday that Elon Musk, owner of both Tesla and social media platform X, poses a future threat to national security under the incoming administration due to Tesla's manufacturing foothold in China and its reliance on revenue from the Chinese market. Musk is set to helm the new Department of Government Efficiency under the Trump administration and has not made clear his plans for his companies once in the position. "Those extensive economic ties, and China's willingness to exploit them, are a dangerous combination, a real risk to this country," Blumenthal said of Musk's business ties to Beijing. POLITICO's Maggie Miller has the full story here (for U.S. Pros!).
Tesla needs China — both as a manufacturing hub and as a lucrative sales market. And Musk has proven his influence with the Chinese. He managed to open a factory in Shanghai without a joint venture and most recently got a tentative official nod to roll out Teslas in China with some limited self-driving capacity, but official approval to start that program remains elusive.
China is aware of its potential ally in Musk. The Chinese Communist Party's official media mouthpiece People's Daily published an op-ed under a pseudonym lauding Tesla's success in China and highlighting it as an example of "win-win cooperation." POLITICO's Jordyn Dahl has the full story here (for U.S. pros!). Musk's office didn't respond to a request for comment.
— HONG KONG OFFICIALS FACE NEW SANCTIONS: The State Department will impose new sanctions on unspecified Hong Kong officials in response to the conviction of 45 pro-democracy activists Tuesday under the territory's national security law. The 45 defendants received sentences of between four and 10 years for their role in organizing an unofficial primary poll in 2020 ahead of the territory's legislative elections. They were "aggressively prosecuted, and many now face life-altering imprisonment simply for their peaceful participation in political activities which are protected under the Basic Law of Hong Kong," State Department spokesperson Matthew Miller said Tuesday when announcing the sanctions.
Beijing — which has pushed Hong Kong authorities to take tough measures against dissent — has little sympathy. "No one should be allowed to use 'democracy' as a pretext to engage in unlawful activities and escape justice," Chinese Foreign Ministry spokesperson Lin Jian said Tuesday.
The convictions took bipartisan heat on Capitol Hill. Rep. Chris Smith (R-N.J.) and Sen. Jeff Merkley, co-chairs of the Congressional Executive Commission on China, urged participants of this week's three-day Hong Kong Global Financial Summit to speak up for the city's beleaguered democratic activists. Those "financial titans should be asked whether the Hong Kong government's mass detentions of political prisoners … undermine the city's attractiveness as an international commercial and financial center," the lawmakers said in a statement Tuesday.
— CHINA COMMISSION URGES AI 'MANHATTAN PROJECT': Congress should establish and fund a "Manhattan Project-like program" that will race to achieve artificial general intelligence capability before China does, according to a report released Tuesday by the bipartisan U.S.-China Economic and Security Review Commission. That investment is needed to counter Beijing's massive investment in AI which "will define both economic opportunity and the successful leverage of security power," said Robin Cleveland, chair of the commission and a former aide to Senate Republican Leader Mitch McConnell.
"China has expanded investment and is accelerating efforts in multiple areas including semiconductors, AI, quantum technologies and biotechnology," Cleveland added. POLITICO'S Mohar Chatterjee has the full story here (for U.S. pros!).
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TRANSLATING EUROPE
— BEIJING BASHES BELGIUM'S TAIWAN TIES: European lawmakers from Belgium got a tongue lashing by Beijing for meeting with Taiwan's visiting Foreign Minister Lin Chia-lung in Brussels on Tuesday. Those lawmakers should "stop any form of official interaction with the Taiwan authorities, and stop sending wrong signals to 'Taiwan independence' separatist forces," Foreign Ministry spokesperson Lin said Wednesday.
— MACRON SEEKS COGNAC TARIFF RELIEF: French President Emmanuel Macron plans to send his prime minister, Michel Barnier, to China as part of an effort to get Beijing to drop duties on French cognac and other European brandies. Macron's announcement came after a Tuesday meeting with his Chinese counterpart, Xi Jinping, on the sidelines of the G20 summit in Rio de Janeiro. The French president said the two leaders had agreed to seek "a favorable outcome" to the cognac duties. The potential breakthrough comes with China and the European Union on the verge of multi-front trade war. POLITICO'S Clea Caulcutt has the full story here.
HOT FROM THE CHINA WATCHERSPHERE
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— TEXAS TAKES TOUGH LINE ON CHINA: The Republican governor of Texas, Greg Abbott, launched a state-level offensive on perceived security risks from the Chinese Communist Party to the state with a trio of executive orders this week. They include:
— a directive issued Monday that targets "transnational repression" of Texans by Chinese operatives in the state,
— an order on Tuesday to harden the state's information security systems from threats including Chinese hackers.
— An instruction published Wednesday aimed to protect "critical infrastructure" including transportation and water systems from Chinese espionage efforts including cyberattacks. Beijing "has made it clear that they can — and will — target and attack America's critical infrastructure," Abbott said in a statement announcing the order.
Chinese authorities dismissed those concerns. "So-called 'transnational repression' is in itself fabricated by the U.S. side to smear China," said Liu at the Chinese embassy.
States stepping up. Abbott's orders are the latest in a series of state government measures over the past two years to confront concerns about the security and economic risks posed by rising U.S.-China tensions. They include state bans on land sales to Chinese entities and legislation requiring state-level "stress tests" to assess the local impact of war across the Taiwan Strait. State pension fund managers have begun pulling their cash from Chinese investment funds to avoid possible losses in the event of conflict with Beijing over Taiwan or in the South China Sea.
China fear factor. Abbott's office didn't respond to a request for comment. Lawmakers who support his orders say they are a necessary precaution against perceived imminent danger posed by an increasingly aggressive Beijing. The Chinese "have been very open about their designs on us and they're very aggressive and very good at causing harm," said GOP Texas state Sen. Bryan Hughes.
Resource rich aggressor. Texas lawmakers are aware that other foreign countries including Russia, Iran and North Korea have a record of cyberattacks on the United States. But Beijing's capabilities make it more formidable. "They have the dollars and the resources to do more damage than the others," said Republican state Rep. Cole Hefner, chair of the Select Committee on Securing Texas from Hostile Foreign Organizations.
Frustration at the Feds. The orders also underscore growing concern among state governments that the federal government — normally tasked with homeland security and defense against foreign espionage — isn't up to the task. "The feds have not been doing their job and the threat in particular from the Chinese Communist Party is so serious," Hughes said.
More to come. This week's flurry of China-targeted executive orders are likely to seed new state laws with similar goals. Brace for "legislation to come out of the committee … to gird our water and transportation systems and our ports and pipelines to make sure it's as hard as possible for the Chinese to infiltrate those systems," said Republic state Rep. Cody Harris, who also sits on the Hostile Foreign Organizations committee.
THREE MINUTES WITH…
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Imprisoned Hong Kong pro-democracy advocate Jimmy Lai has been behind bars since 2020 on alleged fraud charges that the State Department has called "grossly unjust." Lai took the stand Wednesday in his long-delayed trial on separate charges of "collusion with foreign elements" and "sedition" charges — which United Nations legal experts have called a political vendetta. The 76-year-old former media tycoon faces a possible life sentence if convicted. Chinese Foreign Ministry spokesperson Lin called Lai "an agent and henchman of those hostile to China" in response to questions about his case.
China Watcher spoke to Lai's son, Sebastian Lai, about what his father's prosecution says about Beijing's tightening grip on the former British colony.
Responses have been edited for length and clarity.
Why is Jimmy Lai's case important?
It's a show trial. He’s a publisher and a journalist. And he's in jail because of his publishing and journalism. So for a country that says that they still have a free press — it’s a joke. The Hong Kong legal system is essentially being weaponized against my father and [Hong Kong's other] 1,800 political prisoners.
The resumption of your dad's trial coincided with the end of the three-day Global Financial Leaders' Investment Summit – should foreign investors be concerned about his politicized prosecution?
Any leader of a company has to look at what’s happening in Hong Kong and ask themselves: "Is this somewhere where I can responsibly send my people and their families? Do we want to be in a place where you could go to jail for wearing the wrong t-shirt, or for criticizing the government?"
A podcaster asked President-elect Donald Trump in an interview last month whether as president he could get your father released. Trump said "100 percent, I’ll get him out. He’ll be easy to get out." Do you think that Trump has a better chance of brokering your dad's release than the current administration?
My dad’s case has been bipartisan, and we’re incredibly grateful for that. From my understanding, [Trump's] a man of his word. I really hope that he gets my father out, because otherwise my father will die in prison.
HEADLINES
MSNBC: Trump's tariff plan could spark a trade war —and U.S. taxpayers would pay the price
NPR: At Tiananmen Square, tight security with metal detectors reflects a changing China
Rest of World: Chinese startups supported by Microsoft and Google incubator programs worked with police
New York Times: Trump could win the contest with China once and for all
One Book, Three Questions
ZsuZsa Book | Photo Credit: Andrew Haimert/Pexels/Canva |
The Book: Partners in Peace: Why Europe and Taiwan Matter to Each Other
The Author: Zsuzsa Anna Ferenczy is an assistant professor of European studies at Taiwan's National Dong Hwa University.
Responses have been edited for length and clarity.
What is the most important takeaway from your book?
Europe now experiences Taiwan as a like-minded partner on its own merit, and Taiwan is positioning itself as an invaluable Indo-Pacific democracy, a force for good against authoritarianism. As China enables Russian aggression, a stronger sense of solidarity binds Taiwan and Europe. Europe is learning to assert its right to cooperate with Taiwan without diplomatic recognition of the island.
What was the most surprising thing you learned while writing this book?
Contrary to Beijing’s claims, it’s not Europe interfering in China’s internal affairs by cooperating with Taiwan. Instead, Beijing's information manipulation – falsely depicting cooperation with Taiwan as a violation of EU-China relations – has actually accelerated the EU's turn toward Taiwan.
What's the risk/reward ratio for the EU engaging Taiwan "on its own merit rather than exclusively through the China factor lens?"
Engaging Taiwan on its own merit lends weight and credibility to a geopolitical EU that despite much fanfare continues to punch below its weight as the world's largest trading bloc. Expanding ties with Taiwan is part of the solution to reducing the risks of overreliance on China as a trade partner that refuses to play by the rules.
But Beijing will not compromise on Taiwan and will continue to weaponize trade to intimidate and punish member states and companies for strengthening cooperation with the island.
Got a book to recommend? Tell me about it at pkine@politico.com.
Thanks to: Heidi Vogt, Ari Hawkins, Maggie Miller, Jordyn Dahl, Mohar Chatterjee, Clea Caulcutt, and digital producers Emma Cordover and Natália Delgado. Do you have tips? Chinese-language stories we might have missed? Would you like to contribute to China Watcher or comment on this week’s items? Email us at pkine@politico.com
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