Trump has weapons if he wants a trade war with China

SHANGHAI — As a presidential candidate, Donald Trump aimed some of his most blistering words at China, declaring that “we already have a trade war” and suggesting ominously that “we have the power over China, economic power”.

As president of the United States, Mr Trump can use trade — a cornerstone of his populist rise — as a weapon, with the potential to drastically reshape the world’s two largest economies, as well as the companies, industries and workers who depend on their hundreds of billions of dollars in closely linked goods. But neither side may win.

Cutting off trade will not bring back the bulk of US manufacturing jobs lost to China in previous decades as it became the world’s factory floor.

Already, some industries that left the US years ago, such as garment making, are now leaving China for even cheaper places. An aggressive stance with China also risks antagonising an authoritarian government with its own brand of economic nationalism.

Yet the unsettling reality for Beijing is that Mr Trump has a variety of ways to get back at China for trade practices that he, his supporters or people in affected industries view as unfair. China sells a large array of goods to the US that he can aim at for higher tariffs.

The opportunities for China to retaliate would be more limited. In the most basic terms, China buys less from the US. But China could make some strategic strikes at targets such as Boeing, American automakers and American farmers. Beijing exerts tight control over China’s airlines, for example, and sometimes steers contracts to Airbus, Boeing’s European rival, when officials feel that Washington is uncooperative.

“Boeing complains, ‘We have been pretty good friends with China. Why are we always a target’?” said Mr He Weiwen, a former Chinese commerce ministry official who is now the co-director of the China-US-European Union Study Centre at the influential China Association of International Trade in Beijing.

Or China could wreak havoc on the vast yet delicate supply chain behind a wide range of products such as iPhones and auto parts. Six years ago, Chinese restrictions on exports of obscure yet vital minerals led to a global outcry by manufacturers.

Early indications are that trade could take a more prominent place on the White House’s China agenda, which under President Barack Obama was dominated by Beijing’s territorial claims in East Asia and its influence over North Korea.

In a strong signal, Mr Trump has turned to Mr Dan DiMicco, a longtime steel executive and trade critic, to oversee trade issues during his administration’s transition. Mr DiMicco writes a personal blog that blames America’s industrial decline on cheating by trade partners, particularly China.

“Hillary Clinton has claimed Trump’s trade policies will start a ‘trade war’ but what she fails to recognise is we are already in one,” he wrote on his blog last summer. “Trump clearly sees it and he will work to put an end to China’s ‘mercantilist trade war’! A war it has been waging against us for nearly two decades!”

One of Mr Trump’s security advisers told Reuters that the President-elect’s meeting next week with Japanese Prime Minister Shinzo Abe may mark the start of talks to garner Japan’s support for a push back against China’s growing influence in Asia.

China over the past few days has emphasised that a healthy relationship would benefit both sides. On Thursday, Mr Lu Kang, a spokesman for China’s Foreign Ministry, said that “it is in the common interests of both countries to develop a long-term, stable and prosperous trading relationship, and any American politician would take a policy in the interest of his country and the American people”.

Any trade actions by Mr Trump would face limits. This year, he mentioned imposing a tariff of 45 per cent on all imports from China. But he later avoided specifics — and he has limited power to do so anyway. The law allows him to impose tariffs of no more than 15 per cent, and for as long as 150 days, on all imports, unless a national emergency is declared.

Should Mr Trump want to signal an aggressive stance quickly, he could move against imports of steel and aluminium from China. The Obama administration has been preparing to file a World Trade Organization case against China over claims that it subsidised aluminium exports.

China is more vulnerable given the sheer amount it sells to America. For more than a decade, China has consistently exported about US$4 (S$5.64) worth of goods to the US for each US$1 of goods that it imports. THE NEW YORK TIMES

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