US-UK Framework Signals US Intent to Push Nations From Chinese Supply Chains, Witnesses Say
The U.K. should be wary of language in the recently announced trade framework with the U.S. (see 2505090006) that calls on Britain to comply with certain supply chain security requirements, which they said the U.S. could use to pressure the U.K. in its trading relationship with China, the U.K. Parliament heard from witnesses this week.
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Michael Gasiorek, an economics professor at Sussex University and a trade policy researcher, said he’s “concerned” about those supply chain security clauses. He noted that one clause appears to say that any potential trade deal between the two sides will hinge on “whether we, the U.S., believe that you are adhering to our supply chain security requirements.”
The agreement said any future Section 232 tariffs investigations launched by the U.S., or any other future duties, will be “contingent” on the U.K. “ensuring the security of supply chains” for items exported to the U.S. “and on the findings of related U.S. investigations” related to various industry sectors.
“That, I think, is a major shift in the way trade agreements are negotiated, which is highly problematic,” Gasiorek said during a May 14 hearing of the U.K. International Relations and Defence Committee. Although the agreement doesn’t explicitly mention China, Gasiorek said the U.S. is “clearly” trying to “influence third countries in their relations with China, and will exert all sorts of pressure on those countries to do so.”
Gasiorek said the language could be a sign that the U.S. is considering other avenues, besides export controls, to pressure other countries away from selling to China. Gasiorek noted that the U.S. has previously used “restrictions, sanctions and penalties” on companies illegally exporting sensitive technology to China, especially if they’re doing business in the semiconductor industry. But those penalties have “always focused on companies and addressing the penalties to the companies themselves.”
The U.S. could now be looking to penalize entire countries, including with tariffs. “What we have here is the potential that as a result of some supposed infraction or perceived infraction by the U.S., it may impose blanket tariffs on a country on a sector,” he said. “So I think that's quite substantially different to what we had before.”
Dmitry Grozoubinski, founder of the ExplainTrade consultancy and a former Australian trade negotiator, added that the Trump administration has “made it very clear that its perception of national security threats trumps everything.” In the most “truly frightening version,” the U.S. could consider a “Venezuela-like option” for countries that carry out certain trade with China, he said, referring to Trump’s decision earlier this year to impose tariffs on countries that import Venezuelan oil (see 2503240062).
“It is already heading in that direction with its [Section] 301 investigation into ship building,” Grozoubinski said. The U.S. will soon begin charging fees on Chinese and other foreign-built vessels docking at U.S. ports (see 2504220023). “So that is by far the most extreme version of where they might be headed with this.”
In a more “benign” version of the strategy, the Trump administration could try to secure commitments from the U.K. to help the U.S. in its efforts to limit Chinese foreign investments in certain critical industries. The U.S., for example, could choose to sell steel to the U.K. on the condition that the steel won’t eventually be sold on to China.
“For example, if a large Chinese conglomerate wants to buy U.S. steel, the U.S. would say ‘Well hold on, we gave you steel access on the assumption it would be for the British, and not for a Chinese company,’” Grozoubinski said. The U.S. would be “basically trying to prevent the U.K. from being used as a way around the fortress it is trying to build around North America when it comes to Chinese supply chains.”