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Andy Wong / AP

Senior White House officials are quietly preparing to confront China over what they consider unfair practices in the auto industry. It's a move that could profoundly disrupt relations between the superpowers.

Watch for the issue to pop in President Trump's talks next month with China's Xi Jinping.

  • When U.S. automakers sell in China, they are met with import tariffs of 25%. That's why 96% of the 27.5 million vehicles sold in China last year were built there (The New York Times has a great roundup of barriers to trade including tariffs on automobiles).
  • When U.S. automakers like GM build in China, they are required by law to form joint ventures with Chinese companies. Those Chinese companies must own 50% or more of the venture.
  • By contrast, the U.S. imposes tariffs of just 2.5% and lets foreign car companies own their entire U.S.-based operations.
  • U.S. companies have swallowed these rules since the '90s because the Chinese market is so lucrative. But Trump and his nationalist-minded advisers — Steve Bannon, Stephen Miller and Peter Navarro — find the status quo unacceptable.

The White House's calculus: China currently exports very few cars to the U.S., but it's itching to sell dramatically more. Trump is perfectly positioned to negotiate the terms of China's market entry. He's got plenty of leverage with tariff levels and ownership restrictions — though the Trump folks are still hashing out their negotiation strategy.

A playbook for Trump: Michael Dunne, an authority on the Chinese auto market, has three rules — from his book "American Wheels, Chinese Roads" — for American negotiators to deal with China:

  1. If the Chinese want to sell their cars to Americans, they must invest in plants in America.
  2. Chinese companies will be free to own 100% of their operations in America — provided that American car companies get the same rights in China. If the Chinese refuse, then America will reciprocate.
  3. Profits from operations stay inside the United States. Repatriation to China will be limited and will require approvals from the the U.S. government.

Go deeper

Reports: CIA finds "Havana Syndrome" unlikely caused by foreign campaign

CIA Director William Burns testifies during a Senate hearing on Capitol Hill last April. Photo: Saul Loeb-Pool/Getty Images

A preliminary CIA report rules out a foreign global campaign as the cause of American and Canadian diplomats affected by a mysterious illness known as "Havana syndrome," per multiple reports.

Why it matters: Some lawmakers had suggested the sometimes debilitating illness was due to directed energy attacks. But CIA officials told the New York Times that most of the 1,000 cases reported to the government could be "explained by environmental causes, undiagnosed medical conditions or stress." This finding has angered some victims, per the NYT.

Jan. 6 panel subpoenas 2 far-right "America First" activists

The House panel investigating the Capitol riot, from left; Reps. Bennie Thompson, Liz Cheney, Adam Kinzinger and Jamie Raskin on Capitol Hill in December. Photo: Drew Angerer/Getty Images

The House select committee investigating the Capitol riot issued subpoenas Wednesday for far-right leaders Nick Fuentes and Patrick Casey, who allegedly encouraged followers to go to D.C. and challenge the 2020 election results.

Why it matters: The action underscores the panel's increasing focus on rallies held ahead of the Capitol attack and how extremists were drawn to former President Trump's baseless claims of widespread voter fraud, per the New York Times.

Democrats fail to change Senate rules to pass voting rights bill

Senate Majority Leader during a news conference in Washington, D.C., on Wednesday. Photo: Alex Wong/Getty Images

Democrats failed Wednesday night to change Senate filibuster rules to pass the voting rights bill, with Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) voting with Republicans.

The big picture: The failed effort came after Senate Republicans blocked the voting rights measure from coming to a final vote earlier Wednesday.