What Happens When Trumps Tirade War With China Becomes a Trade War?
The big risk—that a trade war would lead to a shooting war—probably is overrated. But that’s because China has so many economic weapons at its disposal.
BRENDON HONG
01.16.17
12:15 AM ET
HONG KONG—No matter how some pundits frame current U.S.-China relations, Beijing wants no part in armed conflict with America. Open war—whether framed as escalation of tensions across the Taiwan Strait, in the South China Sea, or due to geopolitical head-butting—is not a feasible option for either side. The globe’s two largest economies not only share intimate economic ties; their fates are intertwined. But the occasional bloody nose is unavoidable. The battlefield where China and America trade blows may well be trade.
President-elect Donald J. Trump has repeatedly said he will “get tough on China” once he takes his seat in the Oval Office—a promise that previous administrations have pursued and failed to realize. Trump’s pick for top diplomat, Rex Tillerson, has even singled out the South China Sea as a critical juncture during his senate confirmation hearing, dictating that China should be banned from accessing its artificial islets built in choppy waters. (Tillerson failed to lay out an executable plan that would achieve this objective, and Reuters reported that a Trump transition advisor tried to dial back Tillerson’s comments by saying a naval blockade was not an option.)
But what exactly does being “tough on China” mean? Trade wars are fought on paper, in cargo ports, in factories, and even in supermarket aisles. Punitive tariffs—like those promised by Trump during his improvisational presidential run—and import quotas are the basic weapons that can be deployed. A devastating scenario would be a devaluation of the Chinese currency by Beijing.
The rule of thumb is that the country with a trade surplus—in this case, China—has more to lose in a trade war, but the circumstances we face are anything but common. If Trump and his cronies indeed do decide to slap the People’s Republic with punitive measures, Beijing will feel pain, but it will not go down without a fight.
http://www.thedailybeast.com/articles/2017/01/16/what-happens-when-trump-s-tirade-war-with-china-becomes-a-trade-war.html
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