Trade War Fears Ease as Trump Chooses Less Aggressive Option Against Chinese Tech Firms

June 27, 2018, 4:33 PM UTC

In the latest saga of the back-and-forth trade negotiations between the U.S. and China, president Donald Trump backed away from more aggressive curbs against Chinese investments in U.S. technology firms, temporarily soothing trade war fears.

In a statement Wednesday, the White House said it would back plans to strengthen an existing process to review foreign investments in U.S. companies. While still likely to keep such investments in check, the move is less aggressive than expected. Previously, it has been reported that the Trump was considering barring many Chinese firms from investing in the U.S. tech industry. Trump, however, has denied those reports.

Now the White House plans to back a piece of potential legislation that would give the Committee on Foreign Investments in the United States (CFIUS) more power to decide whether a foreign investment may be a national security threat. That piece of bipartisan legislation has passed both Senate and House, and is awaiting final vote from Congress.

“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,” Trump said in the statement.

The proposed legislation would allow CFIUS to review even more types of foreign investments in domestic assets, including the acquisition or leasing of real estate near U.S. military bases.

U.S. stock markets lifted moderately on the news—reflecting higher investor optimism that the tit-for-tat between the U.S. and China will resolve without a full blown trade war. The Dow Jones Industrial Average lifted nearly 200 points to 24,469 as of midday trading, while the S&P 500 rose 18 points to 2,740.

That comes as Trump has often accused Chinese firms of steal intellectual property from U.S. companies, a complaint he has used as a major reason behind recent tariffs against the Asian nation. Earlier this month, the chief executive approved plans to hit China with $50 billion worth of tariffs starting July 6. Beijing, responded in kind, making good on plans to impose the same amount in duties against U.S. imports.

“That’s not just China, that’s everywhere,” U.S. Treasury Secretary Steven Mnuchin told CNBC on Wednesday. “We will have the necessary tools to protect investments, whether it’s China or anybody else.”

Notably, Trump has also imposed tariffs on steel imports from Europe, Mexico, and Canada.

Still, the law to strengthen CFIUS is no shoe in, with Trump warning that if Congress fails to pass “strong” legislation around the agency, he “will direct my Administration to deploy new tools, developed under existing authorities, that will do so globally.”