Did Trump Use Undue Influence to Receive Chinese Trademarks?

China approved trademarks for 38 Trump Organization businesses after a delay of nearly a year. Experts are trying to determine if this was part of the normal course of business, or if China is trying to smooth over the recent friction between President Trump and China’s President Xi Jinping. The decision to try and protect the Trump brand in China, despite the relatively low level of business activity that the company currently is pursuing is raising some eyebrows. Additionally, although four trademark requests were recently denied, the number of applications approved within just a few months caught some intellectual property consultants by surprise. Is China providing the Trump Organization with preferential treatment in an attempt to avoid costly import taxes threatened by the administration?

China grants the Trump Organization 38 Trademarks in possible ethics violation.

Trump Wins Fight with Chinese Trademark Office after 10 years

While the most recent group of trademark applications was approved relatively quickly, this is not the first time that Trump has been in conflict with the Chinese trademark office. Since 2006, Trump has been fighting to keep ownership of his brand in China. A decade-long lawsuit was finally settled in 2016, immediately after Trump was declared the winner of the American Presidential election.

At the heart of the matter was the frequent process of squatting. China is particularly well known for the practice.  Individuals apply for trademarks under the name of another famous person. They hope to get a valuable settlement later on, in exchange for trademark rights. As part of his lawsuit, Trump pointed out that there were more than 50 trademarks with Trump branding in 2016. However the Trump Organization owned less than half  of these products.

At first China’s State Administration for Industry and Commerce (SAIC), which oversees trademark applications, ruled against Trump’s request for branding related to “construction-information”, which in China usually means real estate services. The SAIC said another individual had already filed a similar request. The office alleged having two businesses with the same name and services would confuse consumers. However, the office finally approved the request in November 2016. The SAIC still dismissed Trump’s request to have the other trademark voided.

Is a Trade War on the Horizon

If China is trying to curry favor with the Trump administration, now is certainly a good time to do so. The President has called China a currency manipulator several times, although he has not actually begun the formal process necessary to impose punitive import taxes. There is currently a divide between Republicans about how to address the trade imbalance with the Chinese. One side is looking to protect American manufacturing from the unfair advantages offered by China’s cheap labor and protectionist economic policies. The other side supports globalization and wants to stress transforming the American labor force away from low wage, low skilled jobs into higher paying tech positions.

There will be a negative impact for both individuals and businesses of restricting Chinese imports. Therefore it may be wise for Trump to focus on free trade. Currently, China is taxing foreign imports heavily. Removing these tariffs would allow American companies to enter a huge new market. Chinese consumers are buying goods from foreign companies. In February, China posted a monthly trade deficit for the first time in three years.

China Warns America about the Risks of Inciting North Korea

Chinese ongoing conflicts with America are also going outside of the financial arena. North Korea performed ballistic missile tests last month. Subsequently, President Trump approved the shipment of an anti-missile defense system to South Korea. China acknowledged that North Korea bore some of the blame for the heightened tension in the region. But the country’s Foreign Minister Wang Yi questioned the steps that the U.S. was taking to resolve the issue. According to Wang, “The two sides are like two accelerating trains coming towards each other with neither side willing to give way. The question is: are the two sides really ready for a head-on collision?”

How Will the Chinese Stances on Trademarks and Trade Deficits Affect the Markets?

If China and America can reach an understanding regarding trade, this will be good news for the dollar. Additionally, many companies which import Chinese goods, such as Walmart and Target, should see stock price increases. If China agrees to accept more American goods, the Dow and S&P 500 should see a healthy bounce, led by transportation companies that have already signaled their intent to focus on the emergent Chinese market.