Date
21 July 2019
Washington appears to have enough cards up its sleeve to force Beijing into submission. Photo: AFP
Washington appears to have enough cards up its sleeve to force Beijing into submission. Photo: AFP

What is really behind Trump’s latest trade blitz?

Just as the entire world is under the bullish impression that the United States and China are already entering the home stretch of their trade talks, US President Donald Trump suddenly tweeted on Sunday that he is planning to raise tariffs on US$200 billion of Chinese goods from 10 to 25 percent by this Friday, and then on another US$325 billion of additional products shortly.

Trump’s shocking tweet immediately triggered a global stock market selloff on Monday.

So what could be Trump’s motives behind his latest blitz against China, which has thrown Beijing completely off guard?

We can actually find some clues if we take a closer look: apparently, what the populist president is truly after isn’t just fair trade.

Rather, under his “America First” election pledges, Trump is trying not only to emerge as the winner in the US-China trade talks, but indeed, the winner that takes all.

By threatening to massively step up tariffs on Chinese goods, Trump is obviously trying to force Beijing into making further substantial concessions over issues like cracking down on infringement of intellectual property, stopping mandatory technological transfers, reducing or even scrapping subsidies for mainland enterprises, and above all, importing more US goods.

And the reality is, while Washington appears to have enough cards up its sleeve to force Beijing into submission, there isn’t much China can do when it comes to launching counter-offensives.

That’s because while the US can impose punishing tariffs on US$200 billion of Chinese imports, and then on another US$300 billion whenever it wants, China cannot, because the country is currently only importing some US$150 billion worth of American goods annually.

Besides, there is already a bipartisan consensus between the Republicans and the Democrats over using trade war to gain leverage over China, which means Trump has the backing of Congress over his latest onslaught against Beijing.

However, even amid Trump’s intense saber-rattling, the Chinese Ministry of Commerce on Tuesday said that Vice Premier Liu He and his delegation will go to Washington on Thursday for two days of trade talks, suggesting that the relationship between the US and China might not be as bad as it seems.

If so, is Liu likely to change Trump’s mind and de-escalate the ongoing crisis?

Well, since the US has already gained the initiative, not to mention that Trump is a master of flip-flopping, perhaps what Beijing can do in order to prevent the trade talks from totally falling apart is to make further concessions on Washington’s terms.

This article appeared in the Hong Kong Economic Journal on May 7

Translation by Alan Lee with additional reporting

[Chinese version 中文版]

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Hong Kong Economic Journal

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