THE TRADE WAR has started. Whether it will be a short, sharp skirmish or a drawn-out campaign is impossible to predict, mainly because the actions of US President Donald Trump are so unpredictable.
Trump has got the tariffs he loves. First, general ones on steel and aluminium; now specifically anti-Chinese ones on up to $60 billion-worth of exports following a Section 301 investigation into alleged theft of US intellectual property by Chinese firms, plus some formalisation of the curbs already being put in place to restrict Chinese firms acquisition of US technology via mergers and acquisitions.
The United States will publish the detailed sanctions within 15 days but they are expected to focus on the aerospace, information and communications, and machinery industries — all sectors of the Made in China 2025 initiative. Details of new US investment restrictions will be announced by the US Treasury within 60 days.
China has said it will stand its ground in defence of its national interest. Immediately, it looks set to impose retaliatory tariffs for the United States’ steel and aluminium tariffs on $3 billion of imports from the US such as food, wine and agricultural produce. It is difficult to imagine that China will not also retaliate against the latest round of tariffs.
Whether Beijing’s offer of some opening of its markets to US firms comes to anything is anyone’s guess at this point. China has made such offers in the past and Trump may regard this latest one as further appeasement of the sort he likes to reject as ‘not working’. When it was first presented by now Vice-Premier Liu He when Beijing was trying to preempt sanctions earlier this year, it cut little ice in Washington.
The shakeup of the US foreign policy and national security team in recent weeks seems to confirm a hawkish shift within the White House. That may mean Iran and North Korea deflect attention from the China trade issue, but it would be a brave soul who would bet on it.
If anything, the departure of the foreign policy moderates leaves even fewer constraints on the China trade hawks who now dominate that part of the administration.
For Beijing, the challenge becomes to reformulate its approach to Washington now its policy of containment of Trump is under stress.