Trump's tariffs on Chinese imports could be retaliation for years of slights—real or perceived

As far as transport and logistics giant UPS Inc. is concerned, access for foreign companies to China's vast express delivery market is open in name only.

The country's regulatory regime is still highly restrictive, says Atlanta-based UPS, which entered China 30 years ago through a joint venture agreement and took ownership of its business there in 2005. Foreign express delivery companies increasingly require business permits and licenses to operate, and the sector is a "target of regulatory oversight on almost every aspect of activity and by every level of government, including central, provincial, and municipal," said a person familiar with the situation. China still bars foreign providers from entering the domestic letter and document delivery markets. International express service is licensed on a province-by-province basis, and domestic express licenses are granted city by city; the government began granting UPS domestic licenses on a planned, multi-year schedule starting in 2012, the person said.

President Trump's decision yesterday to impose tariffs of 25 percent on about 1,300 imported products from China—the affected items won't be published by the U.S. Trade Representative's (USTR's) office for another week or two—is aimed at punishing China for alleged thefts of American high-end technology and intellectual property. Yet underlying Trump's action is a simmering resentment on the part of U.S. business interests that China has spent nearly two decades unfairly protecting its markets and industries while at the same time enjoying the fruits of open and profitable trade that came with its entering the World Trade Organization (WTO) in 2001.

No one would talk on the record about the broader concerns of U.S. business in trading with China. However, one person said yesterday's decision reflects a years-long buildup of tensions and aggravation about a lopsided playing field in U.S.-China trade. "There are so many stories and anecdotes" about how difficult it is for American companies to compete with state-owned Chinese firms while having to jump through one regulatory hoop after another, the person said.

Jon Gold, vice president of supply chain and customs policy for the National Retail Federation (NRF), the nation's largest retailer trade group, surmised that the administration's moves are more targeted at staying China's hand in the intellectual property, aerospace, and IT areas, the latter being critical given America's concern that China wants to procure advanced U.S. technology like robotics to support its "Made in China 2025" initiative, which aims to guide the country's industrial modernization and would, over time, substitute foreign technology with innovation developed inside the country.

For now, NRF's members are in wait-and-see mode until USTR releases the list of tariffs, Gold said. NRF and the Retail Industry Leaders Association (RILA), among other retail groups, are concerned the tariffs will hit apparel, footwear, toys, and other everyday consumer goods, effectively punishing American consumers with higher prices for many staple items.

Gold said that NRF members have not voiced concern that an escalating trade conflict with China would compel them to shift manufacturing and distribution operations elsewhere in the Asia-Pacific region just to get out of the line of fire. Many U.S. businesses have deeply rooted infrastructures in China. Moving them to lower-cost countries such as Vietnam, while a good idea in theory, is not practical in the real world, Gold said. "You can't just shut off operations and quickly move them to another country," he said.

This is not the first time the U.S. and China have battled over intellectual property protection. In 2007, the U.S. filed a complaint through the WTO's dispute-settlement mechanism, according to Dr. Fragkiskos Filippaios, who holds the title of "reader" in international business in the Kent Business School at the University of Kent in the UK. (A reader in UK universities is above senior lecturer but below professor.) The dispute was settled three years later and favorably for the U.S., with China being required to implement steps that would protect U.S. intellectual property, Filiappaios said.

Yesterday's measures reflect the Trump administration's lack of confidence in the traditional rules-based process, which takes a long time to resolve disputes and consumes a lot of resources, Filiappaios said. However, the mechanism has improved radically over the last few years and has managed to resolve issues in a more reasonable time frame, he added. In addition, stakeholders recognize that in most cases the outcomes have been fair to all parties involved, he said.

Filiappaios warned that Trump is walking down a dangerous and counter-productive path by bypassing the processes of the WTO, of which it remains a member. "There is a very clear structure to resolve disputes, and if countries start going their own way trying to resolve them, we could end up in a chaotic situation with regards to global trade that won't be beneficial to anybody," he said in an e-mail today.