China is not the only country Donald Trump is targeting with his trade war – indeed, no American ally is likely to emerge unscathed. And while China may have sufficient muscle to fight its corner, others may not be so lucky.
When he was campaigning to be president, in a seven-point economic plan to “Make America Great Again”, Trump had promised to employ Section 232 of the Trade Expansion Act of 1962 as well as Section 201 and Section 301 of the Trade Act of 1974 to punitively sanction countries that had serially run-up trade surplus vis-à-vis the United States (in his view unfairly extracting America’s wealth). Trump as president has put each of these tools to use and it’s America’s allies that have borne the brunt.
On January 22, Trump signed a proclamation under Section 201 of the Trade Act, imposing tariffs on imports of solar cells, modules and manufactured washing machines. The action was the first of its kind in 16 years, with South Korea, China and Vietnam its key intended targets.
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On March 8, Trump imposed a global tariff of 25 per cent on steel imports and 10 per cent on aluminium imports, under Section 232 of the Trade Expansion Act. The probe was the first of its kind since one launched on iron and steel in 2001. Canada, Mexico and the European Union have taken the largest hits from this. China, not so much – it is not among the top 10 steel exporters to the US. Another Section 232 probe on autos and parts that could impact bottom lines in Germany and Japan is underway.
On March 23, Trump issued a memorandum listing measures to be initiated against China following a Section 301 investigation of its trade, investment and intellectual property policies and practices. On Friday, a first tranche of tariffs under Section 301 went into effect – the first time it has been so used against a trading partner since the early 1990s.
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Trump’s actions have not gone unanswered. In eight months, the US has been hauled up within the World Trade Organisation’s dispute settlement system on a record 16 occasions by nine trading partners. Although these partners range from treaty allies to adversaries, a disproportionate number are the former (Japan, South Korea the EU, Canada, Norway) or are sought-after partners (India, Vietnam).
Canada has in fact taken the lead in filing the most cases against the US. Separately, each of the nine trading partners with grievances has also imposed retaliatory tariffs against Washington. More than US$100 billion of traded goods are subject to unilateral tariffs – the most since the Great Depression. And this number could pale into insignificance if Trump’s quarrels with the EU, China and Japan get entirely out of hand.