Trump Administration Escalates Trade and Investment Crackdown on China
Washington, D.C. – The Trump administration has intensified its economic measures against China, implementing a series of sweeping policies targeting trade, investment, and strategic industries. These moves increase the likelihood of escalating tensions between the world’s two largest economies.
In a recent wave of actions, President Donald Trump issued a memorandum directing the Committee on Foreign Investment in the United States (CFIUS) to curb Chinese investment in key American industries, including technology, energy, and infrastructure. The administration also urged Mexico to impose tariffs on Chinese imports in response to firms relocating production there to circumvent U.S. trade duties. Additionally, the U.S. proposed fees on Chinese-built commercial ships to counter China’s dominance in global shipbuilding.
Impact on U.S.-China Relations and Trade Negotiations
These aggressive measures represent the most significant crackdown on Beijing in Trump’s second term and could disrupt efforts to negotiate a deal to reduce China’s trade surplus with the U.S. The memorandum, referring to China as a “foreign adversary,” underscores the need to safeguard critical American assets, including technology, food supplies, minerals, and transportation hubs.
“This is likely a disappointment for Beijing, which hoped to offer large-scale investments in the U.S. as a concession in negotiations,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.
China’s investments in North America had already declined sharply, with new investment announcements totaling only $191 million in the last quarter, marking a 90% year-over-year drop, according to the Rhodium Group.
Following the memorandum’s release, China’s Ministry of Commerce condemned the measures, urging the U.S. to refrain from politicizing economic and trade relations. The ministry warned that tightening investment reviews on security grounds would erode Chinese firms’ confidence in doing business in the U.S.
Potential Economic Fallout
The memorandum also proposes reviewing a 1984 U.S.-China tax treaty that prevents double taxation and scrutinizing the “variable interest entity” (VIE) structure used by Chinese companies to list on U.S. stock exchanges. Financial experts caution that eliminating such agreements could create uncertainty for investors.
Furthermore, the U.S. is considering new restrictions on U.S. pension and endowment fund investments in high-tech sectors in China, potentially affecting the country’s artificial intelligence, software, and hardware industries, according to UBS Group AG.
Targeting China’s Shipbuilding Industry
The administration is also proposing fees on Chinese-built commercial vessels and mandating that a portion of U.S. goods be transported on American ships. This policy stems from a government investigation into China’s maritime, logistics, and shipbuilding practices that began under the Biden administration and concluded before Trump’s return to office.
China has rapidly expanded its shipbuilding capacity over the past decade, now accounting for roughly half of the world’s new ship construction. Its shipping fleet, valued at $255.2 billion as of January, surpasses that of Japan ($231.4 billion) and the U.S. ($116.4 billion), according to VesselsValue analytics. Following the U.S. policy announcement, shares of major Chinese shipping companies, including Cosco Shipping Holdings and Yangzijiang Shipbuilding Holdings, saw significant declines.
Rising Tensions and Future Trade Uncertainty
The widening economic divide between Washington and Beijing is further exacerbated by Trump’s recent tariff hikes on Chinese goods. In a high-level discussion, Chinese Vice Premier He Lifeng expressed “serious concern” over the U.S. administration’s 10% tariff increase, while Treasury Secretary Scott Bessent reiterated concerns over economic imbalances.
With China’s $295 billion trade surplus with the U.S. remaining a central issue, Trump has hinted at the possibility of negotiating a new deal with Beijing. However, he has also floated the prospect of imposing a 60% tariff on Chinese goods, which could severely disrupt trade between the two nations.
The heightened U.S.-China tensions come as Trump seeks to end the war in Ukraine through negotiations with Russian President Vladimir Putin. While China may welcome an end to the conflict to improve its standing with European partners, the shift in U.S. focus could lead to an even stronger stance against Beijing in the near future.
As the Trump administration continues to implement stringent trade and investment measures, the global economic landscape remains uncertain, with the potential for further escalation in U.S.-China relations.