Tools of the trade war: Trump’s tariffs may hurt his Asian allies, along with the US

Should China label Donald Trump’s America a currency manipulator? It’s doubtful that President Xi Jinping would call Washington on its devaluation gambit. Beijing has ample ammunition, though, to yell hypocrisy with the dollar down about 10 per cent in the year since Trump’s inauguration. Two weeks ago, Treasury Secretary Steven Mnuchin even declared dead the 23-year-old strong-dollar policy.

No one believes Trump’s lame denials on the dollar. Thirteen months ago, he complained that the “strong” exchange rate is “killing us”. Mnuchin is merely delivering. That will rapidly change the economic calculus in Asia. Xi’s China would find it markedly harder to maintain 6.5 per cent growth. It is a sizeable blow to Japan’s reflation efforts and South Korean, Singaporean and Taiwanese exporters. Central banks from Seoul to Manila are sure to rethink plans to raise interest rates.

The real Trump deliverable, though, is massive trade tariffs, something of which global investors got a glimpse on January 22. The levies of between 20 and 50 per cent the White House slapped on imported solar panels and washing machines were the initial wave of a broader battle that could derail regional stability.

Trump held his fire for a year, assuming he could bend China to his trade priorities – or to curb North Korea. Rebuffed on both fronts, Trump is telegraphing that his “era of strategic patience is over” mantra extends to trade. Next target: hi-tech industries, particularly those Trump deems to be stealing intellectual property rights. Another: state-owned enterprises benefiting from Beijing’s industrial subsidies.