What Happens When Trumps Tirade War With China Becomes a Trade War?
The big riskthat a trade war would lead to a shooting warprobably is overrated. But thats because China has so many economic weapons at its disposal.
BRENDON HONG
01.16.17
12:15 AM ET
HONG KONGNo matter how some pundits frame current U.S.-China relations, Beijing wants no part in armed conflict with America. Open warwhether framed as escalation of tensions across the Taiwan Strait, in the South China Sea, or due to geopolitical head-buttingis not a feasible option for either side. The globes 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 Officea promise that previous administrations have pursued and failed to realize. Trumps 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 Tillersons 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 tariffslike those promised by Trump during his improvisational presidential runand 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 surplusin this case, Chinahas 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 Peoples 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