China-U.S. Tariff Dispute
Written by: David Bell
If you have been watching the news lately, there is a dispute between China and the U.S. regarding tariffs. China has imposed a tariff of up to 25% on 128 american goods. This is targeting goods such as pork, wine and fruits. Those products had a worth of up to $3 billion for our economy.
Although this sounds bad for the U.S. because we are going to need to pay more for these goods since China imposed a tariff on them, President Trump has imposed $60 billion of tariffs on alleged intellectual property theft on China. To make that more clear, China has stolen some of our trade secrets and is now selling them for cheaper. For example, American Superconductor started doing business in China. The company partnered with Sinovel, which manufactured the wind turbines while American Superconductor made the technology that powered the turbines. This partnership turned AMSC into a billion-dollar business. They built a factory in China, a design center in Europe, and added hundreds of jobs in both of those countries (Massachusetts).
After working so well together, Sinovel started to show signs of refusal. They owed AMSC about $70 billion on a shipment it had already received, and also refused a shipment that was ready to go. The AMSC stock price had been almost cut in half overnight, losing about a billion dollars in shareholder equity causing them to cut around 700 jobs. McGahn, CEO of AMSC, said “Wall Street had written us off as dead”. That is a big deal for a company, when a credible source that many people rely on called your business “dead”. The graph below shows how from the years 2000 to 2007, China’s IP theft cases were increasing dramatically.
(Fig. 1. This shows the IP theft cases for China between the years 2000-2007)
After the refusal of many shipments, AMSC was wondering why China stopped doing business with them. After investigation, Dejan Karabasevic, an employee of AMSC confessed to giving China the source code for the wind turbines because China bribed him with $2 million, women, an apartment, and a whole new life in China.
You are probably wondering how IP theft relates to tariffs. Well if a country's trade secrets are being stolen by a country that they do a lot of business with, you are going to put tariffs on the goods that the other country needs out of retaliation. In this case, imposing tariffs on goods that China needs will cause a lot of positives and negatives for the economy. A positive would be that we impose tariffs on goods that China is very dependent on so in the long run we earn more money on those goods. A negative to imposing tariffs would be that China might retaliate and impose tariffs on the good we are dependent on. And when retaliation happens between countries it is called trade wars. I feel as though trade wars and tariffs are means of negotiation, if done right, they will benefit the Economy. If both parties come out of the negotiation feeling equitable about the situation, they will feel that it was a success.
You might say that imposing tariffs on goods that China buys from us will cause our economy to lose money, but in reality, trade wars and tariffs help regulate the prices to better our economy as a whole in the long run.
Works Cited“Here's How the China-U.S. Tariff Talks May Already Be Hurting America's Job Growth.” Fortune, fortune.com/2018/04/23/tariffs-trump-china-list-trade-war-jobs/.
Lawder, David, and Howard Schneider. “Donald Trump's next Chinese Tariffs Likely to Hit Consumers' Wallets.” Global News, 22 Apr. 2018, globalnews.ca/news/4159908/donald-trump-chinese-tariffs-effects/.
The Massachusetts-based energy technology company won a landmark case in January against its former Chinese partner Sinovel. “Chinese Trade Secret Theft Nearly Killed My Company.” CNNMoney, Cable News Network, money.cnn.com/2018/03/23/technology/business/american-semiconductor-china-trade/index.html.
The United States has long said that intellectual property theft has cost the US economy billions of dollars in revenue, and thousands of jobs. “How Much Has the US Lost from China's Intellectual Property Theft?” CNNMoney, Cable News Network, money.cnn.com/2018/03/23/technology/china-us-trump-tariffs-ip-theft/index.html.