Fight with China by IP wars

In the past two days we have introduced how Trump is fighting with China (see Fight with China by tax cuts and trade wars, and Fight with China by depreciating US dollar). Of course, all the schemes have multiple purposes. For example, Trump wants to win the midterm election, or to boost businesses of the United States, or to hammer the major rival of the United States, or to show the muscular power in the world. But it is no doubt that fighting with China is one of the purposes.

The next defensive and offensive deployment by Trump is intellectual property (IP) wars. IP provides a huge amount of economic values for businesses. Utility patents are the lifelines of high tech and biotech companies; design patents are the protected efforts of beauty in fashion industry; copyrights are the rewards to writers; trademarks are guarantees of high quality products. IP theft seriously causes economic loss.

IP wars are one tactic of trade wars, but they are the most powerful weapon. Although the investigation results have not been announced, Trump administration made no secret what the results would be: China must pay for the IP loss. In contrast to the tariffs (which are about few billions) imposed on steel and aluminum, IP theft is trillions. What offensive actions Trump will take remain unknown. He may ban importing fake branded goods from China. Chinese electronic companies may be enforced to get patent licenses.

The IP wars certainly will provoke retaliation from Beijin.  China may ban some exports from the United States. Worse, China may dump U.S. bonds to cause sharp increase in interest rates, leading to a series of turmoils in financial markets.

Let’s watch closely during the following months.

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