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US-China relations
Opinion
Cary Huang

Opinion | Donald Trump’s new tariffs may herald a trade war, but China has its own set of weapons

Cary Huang says the new US tariffs on solar panels and washing machines may herald a new era in the US-China trade relationship – potentially a dangerous one for both sides

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China's President Xi Jinping and US President Donald Trump walk past Chinese guards of honour during a welcome ceremony in Beijing in November. The apparent personal rapport between Trump and Xi had not prevented the US president from instituting tariffs on specific products in the past week and threatening to do more. Photo: AFP
US President Donald Trump’s move to slap punitive tariffs on solar panels and washing machines, mostly imports from China, is an opening salvo in a trade clash between the world’s two largest economies that is likely to escalate, despite the personal rapport cultivated with President Xi Jinping.
The decision represents a major step towards fulfilling Trump ’s campaign promise to get tough on trade partners, particularly China, after winning the election on a hawkish platform. Under the Trade Act of 1974, the president may impose tariffs on imports deemed to hurt US industries. More actions loom on trade secrets, steel and aluminium, raising the prospects for a more confrontational relationship between the world’s key economic rivals and top political adversaries – the leading free democracy and last major communist-ruled power – which could herald the dawn of a dangerous new era for relations.
This development may signify the failure of joint efforts by Trump and Xi to navigate the most important bilateral relations in global diplomacy today and could well prolong their temporary suspension of the main official US-China dialogue to bolster economic ties.
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The move followed publication of two China-related policy statements by the Trump administration. The national security strategy report identifies China as a “strategic competitor”, which seeks to erode US security and prosperity, and the 2017 Report to Congress on China’s WTO Compliance suggests widespread intellectual property theft and cyber espionage, forcing technology transfers and discriminatory practices limiting US companies’ access to the Chinese market.
Workers assemble solar panels on the factory floor of the Chinese company Suntech in Wuxi. China. Last week, the Trump administration put a 30 per cent tariff on solar panels considered unfairly priced and a threat to US manufacturers. Photo: AFP
Workers assemble solar panels on the factory floor of the Chinese company Suntech in Wuxi. China. Last week, the Trump administration put a 30 per cent tariff on solar panels considered unfairly priced and a threat to US manufacturers. Photo: AFP

What are the trade cards Donald Trump could play against China?

In real terms, the damage of the punitive tariff to the economies of the world’s two largest trading powers will be small. But the consequences of this decision could be hard to determine, as they depend on how China might retaliate and whether any tit-for-tat confrontation eventually results in a damaging trade war. China has its own leverage and is likely to use the ammunition in its policy arsenal.

China’s toolbox to turn the retaliatory screws in trade tensions with the United States

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