From trade war to third world war? From Korea to the South China Sea, Trump’s tariffs risk escalation
Donald Kirk says US trade deficits make Trump’s aggressive strategy understandable, but China’s reliance on the US market has played a major role in keeping disputes – particularly over territorial waters – under control. As Trump hinders access, that could change
The US contends that, eventually, some of the United States’ trading partners will realise they need to slash their barriers to imports and also make life easier for American companies doing business on their soil.
Everyone else, however, blames Trump for upsetting global trading patterns and bringing on what could be a new era of restrictions and restraints on free trade. Go one step beyond that, and countries are going to begin blockading shipping and closing borders entirely. Finally, there is the danger of war as the only recourse that some leaders will decide is needed to set matters straight again.
In this great power struggle, it is extremely difficult to sort out right and wrong. Countries and companies make claims and counterclaims as in a courtroom drama in which one aggrieved party is suing another. The Americans see just about every major trading partner as unfairly dumping goods on American markets at extremely low or zero tariffs while imposing high tariffs on imports from the US.
The worst offender, as far as the US is concerned, is China, whose exports to the US exceed its imports by about US$400 billion. That’s such an extraordinary trade imbalance that it’s difficult to believe it reached such heights without provoking an outcry much earlier.
In fact, American negotiators have been complaining for years that the value of the Chinese yuan is set far too low so Chinese products can be exported cheaply. They also say China sets up barriers to imports that make it difficult for American products to get into China or to compete effectively once they get there.
Actually, tariffs on US$34 billion worth of Chinese exports to the US is not that huge an amount considering the spectacular overall total of Chinese exports, but Trump is talking about imposing still more tariffs.
Watch: ‘Biggest trade war in economic history’ begins between US and China
The global trade war is no doubt most serious between the US and China in view of the potential for conflict eventually breaking out.
Think of Chinese support for North Korea: Pyongyang relies on Beijing for virtually all its oil and a large percentage of its food, among many other items. If the US fails in its dialogue with North Korea over denuclearisation and the danger of war again hovers over the Korean peninsula, China would surely side with North Korea, as it did in the Korean war.
One reason US and Chinese military forces have not come to blows is that the Chinese are well aware of how much they depend on the Americans for the vast sums they earn for all those exports. Cut down the trade surplus, and the Chinese might feel quite differently about US warships periodically challenging their control over the South China Sea.
The trade war also has an immediate impact on US relations with South Korea. Trump is not happy about the Korea-US Free Trade Agreement. He has insisted on some revisions, and he undoubtedly would like more. Korea’s trade surplus with the US last year was US$23.1 billion, down from a high of US$28.3 billion in 2015 but still considerably more than US trade officials would like. If Trump is refraining from talking really tough to the South Koreans, the reason is undoubtedly that South Korea’s basic security and moves towards inter-Korean reconciliation take priority.
The global trade war, with the US both target and adversary, is just as bitter in disputes between the US and its northern and southern neighbours, Canada and Mexico, and in spats with the European Union, many of whose members are allied with the US as members of Nato.
Trump inspired retaliatory measures amid outcries of anger after he slapped tariffs on steel and aluminium imports in what he said was an effort to rescue American industry and jobs for American workers. The deficit with the EU last year was US$151.4 billion. With Mexico, the deficit was just under US$80 billion, and with Canada it was slightly over US$17 billion.
With numbers like these, it’s easy to see why Trump is talking so tough about the trade deficit while America’s trading partners are outraged by moves to cut it.
The fear, however, is that these nasty battles could eventually explode into armed conflict in which hundreds of millions, maybe billions, would perish. Policymakers and negotiators have to keep this risk at the top of their concerns as they confront one another in a global trade war that could someday erupt into the third world war.
Donald Kirk is the author of three books and numerous articles on Korea