The White House eyes new economic penalties against China as trade talks kick off

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The White House eyes new economic penalties against China as trade talks kick off

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  • The Trump administration has continued to weigh a range of additional punitive measures it could take against the Chinese economy.
  • That has cast uncertainty around recently resumed efforts to defuse trade tensions between the two sides.
  • Potential proposals aim to limit investment flows into China and increase financial scrutiny of companies based there.
  • Visit Business Insider's homepage for more stories.

The Trump administration has continued to weigh a range of additional punitive measures it could take against the Chinese economy, casting uncertainty around recently-resumed efforts to defuse trade tensions between the two sides.

White House officials have moved forward with discussions on a potential plan to limit investment flows into China alongside a series of separate but related policy drafts, a source familiar with the matter told Business Insider. The New York Times reported Thursday that the administration is also considering ways to increase financial scrutiny of Chinese companies on various fronts.

That could happen through shifts toward increasingly severe - or even criminal - punishments for financial disclosure violations and broader criteria for a company to be blacklisted, according to the Times. Other proposals outlined in a circulated memo on the plan, which was drafted by informal White House adviser Michael Pillsbury, aim to restrict capital flows within and outside of mainland China.

Pillsbury and the White House press office did not offer comment on the matter Thursday. When asked about the plan to broaden and tighten financial rules for Chinese companies, a Commerce Department spokesperson said there were "no announcements to make at this time."

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Such measures would be seen as a significant economic escalation from the US, which has so far used tariffs as its main source of leverage in its dispute with China. The two sides have levied tariffs on thousands of each other's products and vowed to raise them further next week and in December.

Read more: China is reportedly open to a partial trade deal with the US - but only if Trump scales back planned tariffs

Bloomberg first reported on the potential US proposal to restrict portfolio flows into China, which was publicly disputed by the Trump administration but has been confirmed by several news outlets including Business Insider.

Early on Thursday, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin began a thirteenth round of economic negotiations with a delegation led by Vice Premier Liu He. The two sides have struggled since early 2018 to forge any concrete compromises on structural issues, such as technology and intellectual property rules.

Trump announced that he would also meet with Liu on Friday, lifting optimism toward the discussions after a disputed report that China could leave earlier than planned. In public statements, the president has regularly shifted between a willingness to reach a deal with China and the possibility of a prolonged dispute.

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"Big day of negotiations with China," the president wrote on Twitter. "They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House."

Now read: The world's most accurate economic forecaster sees a 'prolonged global slowdown' on the horizon - and warns it can only be narrowly avoided

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