Trump backs off imposing China investment limits

President Donald Trump spoke during a rally in South Carolina Monday

President Donald Trump spoke during a rally in South Carolina Monday

Treasury Secretary Steve Mnuchin downplayed the perception that the new measures were aimed mainly at China, telling CNBC he did not expect any significant economic effects.

Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the "crown jewels" of US intellectual property.

CFIUS has already been more aggressive under Trump, especially on China.

He has often criticized China harshly, accusing it of "economic aggression", yet insisted that he considers Chinese President Xi Jinping a friend. "We don't have to prevent the North Koreans buying USA technology because you can't buy USA technology with rice". "And we believe it will affect the competitiveness of the United States".

Trump's choice shows that he is favoring a more measured strategy that requires coordination with Congress, rather than working exclusively through the executive branch.

While Wednesday's statement from the president does not explicitly mention China, reports indicated that Trump was considering much harsher measures to specifically block Chinese investment as part of the ongoing fight over Chinese theft of American intellectual property.

"We don't see any problem ... we always follow global rules and the laws of the investment destination countries", Xiao told reporters on the sidelines of a conference on Belt and Road Initiative in Hong Kong in reply to a question over possible stricter screening of Chinese investments in the US. "If policy evolves in a week, and it's based on what somebody sees on Fox News, then you've got a problem".

DeBusk said that trade tensions have driven the U.S. stock market down and said that Trump might be seeking a way to avoid "a potentially catastrophic" trade war with China.

The Dow Jones fell 166 points (0.7pc) to 24,118, and the S&P 500 dropped by a sharper 0.9 per cent.

Asked about this apparent change in position, Mnuchin said, "It is not a question of whether we are focusing on China or we are not focusing on China" but rather an issue of using all available tools to deal with US-China trade disputes. "Like Goldilocks, the policy is either too hot or it's too cold".

"It is a welcome surprise given the other signals" from the administration, said Jake Colvin, vice president of the National Foreign Trade Council.

Instead, the promised export controls were replaced by a Commerce Department study and a reliance upon legislation to enhance the Committee on Foreign Investment in the United States, or CFIUS. "One week he's pulled one direction, the next, the opposite", said Senate Minority Leader Charles E. Schumer (D-N.Y.).

After CFIUS' review, the president can block transactions found to pose a threat to the national security of the United States, the official added.

"The administration is wise to set aside rumoured plans for broad, blunt executive action that could have hurt American manufacturers and consumers", said Rep. Ed Royce, R-Calif., the chairman of the House Foreign Affairs Committee. The Chinese don't want to play by the rules. That's a healthy process.

"If in fact President Trump is now backtracking on tough limits on Chinese investment, it is a VERY BIG MISTAKE", tweeted Sen. Marco Rubio (R-Fla.) wrote on Twitter. The legislation would give the interagency panel expanded authority to review cross-border business deals - other than takeovers - that involve sensitive technology transfers or sites near sensitive USA government facilities and have national security implications. He has long accused other nations of exploiting poorly negotiated trade deals and of using unfair practices to sell America far more than they buy from it.

In a statement, Trump said, "I have concluded that such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity".

Mnuchin told reporters that the differences among Trump's advisers had been overblown.

Still, the president's frequent tactical shifts mean no adviser's victory is ever permanent.

"Up until now, it hasn't worked".

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