Dakota Beacon

Tariffs -- the hot topic of the day! Time to level the trading playing field with those who have taken advantage of US good will and big heartedness. A little short-term pain will bring long-term gain.

China’s Communist Party (CCP) earned for its nation a wee bit of retribution for its bad behavior. More than a US competitor, China’s foreign trade policy made it an adversary, if not an enemy, on course to dominate the US. In 1983 most of China’s economy was pre-industrial. It was on par with, or below, that of colonial America’s economy. Since then, China’s industrial economy grew to be three times larger than that of the US. How was this possible?

The President and Congress today know the score. For decades they saw the CCP lie, cheating, and stealing, forcing the US into near economic subservience. According to a 2024 report from the House Committee on Homeland Security, China steals between $300 and $600 billion worth of US technology and intellectual property every year. This compares largely with findings from a 2017 report from the Commission on the Theft of American Intellectual Property.

President Tump and his administration, unlike earlier administrations, no longer plays nice with the CCP. Tariffs imposed on China become more than a negotiating tool to level the trading field. Tariffs wield a big stick challenging the CCP’s fraudulent behavior. Given China’s weak national economy, implementing tariffs adds hurt to China which could be avoided.

Digging into Chinese deceptive trade practices reveals some unsavory behavior. China’s effort focuses on obtaining industrial technology, including manufacturing processes, formulas, and designs. To conduct this, China routinely violates trade agreements.

According to China expert Gordon Chang, "The Chinese have been predatory, and they've engaged in criminal acts, theft of U.S. intellectual property. But the story here is not China…The story here is that we allowed them to get away with this. We knew what was going on. We've known it for decades, and we never really took effective action to stop it." The US coddled CCP’s bad behavior over decades capping it with China’s admission to the World Trade Organization (WTO) in 2001.

From favored trade status to forced technology transfers, Beijing leveraged US goodwill, market access, and corporate greed to become our most powerful strategic competitor.

Almost all Chinese companies were built on stolen technology. Huawei, one of the biggest technology companies in the world, has invented exactly -- nothing. All underlying technologies were either transferred “gratuitously” or stolen through outright corporate espionage.

China’s main path of technological theft focuses on acquiring ownership in strategic US corporate assets. China typically strongarms US companies to agree to unfavorable terms if the companies wish to do business in China. And typically the US companies agree.

US businesses are happy to trade technology for short-term profits. Of course, this practice returns to haunt them. Once the Chinese have gotten the technology and knowhow, they often make copycat products and begin competing with their former employer.

The US has a huge trade deficit with China running $300 billion per year over the last ten years. US companies pay for this deficit by selling assets. Assets include shares of stock in US corporations. CCP functionaries buy shares in US industrial and technology corporations. In turn, these shares are then used to transfer proprietary technology to Chinese agencies.

This creates a coordinated effort by the CCP and quasi-state actors to acquire US technology. These CCP “owners” deliberately violate their financial responsibilities to the US companies. After pillaging the technology, they are free to liquidate their holdings.

Technology pilfering may also occur when US companies “offshore” their production to China. Offshoring occurs when a US company sends in-house jobs to another country to be performed there before shipping the product to China. As such, US companies must “partner” with a Chinese company, who then performs all staffing and operational management of the factory. As a part of this deal, the US company must share its propriety technology with the Chinese company and train the Chinese workers. Subtle, but very effective.

By curtailing technology theft using high tariffs, the US will certainly restore her upper hand. This, in turn, will rapidly foster the reconstitution of the US’s economic and industrial base while reducing the irksome problem of technological theft.

Yes, the US will bear some temporary discomfort while correcting decades of dalliance. On the other hand, if the US does not use tariffs to her advantage, then, to coin a phrase, “America will continue to feed China until the dragon has grown past the point of taming or slaying.”

Dennis M. Patrick can be contacted at (JavaScript must be enabled to view this email address).