Short-seller Carson Block: I caught China cheating on aluminum exports to US

  • Carson Block believes China doesn't play fair in its trade with the U.S.
  • "From my view of the aluminum industry and also the capital markets, China is a systematic cheater of the multilateral trading system and does funnel state resources into producing goods that it sells for subeconomic costs in Western markets," he says.

Carson Block says China is a "systematic cheater" in global trade.

The closely watched short-seller said that his firm in 2015 found Chinese state-owned banks made billions in loans to shell companies that exported aluminum to the U.S. at subsidized prices.

"From my view of the aluminum industry and also the capital markets, China is a systematic cheater of the multilateral trading system and does funnel state resources into producing goods that it sells for subeconomic costs in Western markets," Block said Wednesday on CNBC's "Squawk Box."

President Donald Trump announced last week that the U.S. will impose tariffs of 25 percent for steel and 10 percent for aluminum. The president has cited the trade deficit with China as a big reason for the measures even though Canada and Mexico are bigger exporters of steel to the United States. Trump has hinted that his administration will take further action against China directly.

Block isn't a fan of the way Trump is planning the tariffs. He said the U.S. should work closely with its allies and focus the tariffs on China.

Trump's tariffs "could actually end up creating more problems than it solves," he said. "This should at least be a G-7-wide effort to punish China. ... We're actually being painting as the bad guys here" as the lone wolf versus working with partners.

Block is chief investment officer of investment firm Muddy Waters Capital. He is known for his short-selling research, which led to several government fraud investigations and financial restatements.