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Did Trump just launch a trade war with China?

Michael Knigge
March 22, 2018

US experts agree that by signing hefty tariffs to punish what he views as Beijing's unfair practices, President Donald Trump just fired the first salvo in a trade conflict with China. Is there a strategy behind the move?

USA Washington - Donald Trump verhängt Strafzölle gegen China
Image: Reuters/J. Ernst

In early March, President Donald Trump declared in one of his regular early morning tweets that trade wars "are good, and easy to win" for a country like the US that, as he described it, loses billions of dollars on the practice with most other countries.

Three weeks later, Trump followed up on his musings by announcing massive tariffs against China, a move that scholars say will indeed trigger a trade conflict between the two largest global economic powers.

"It will spark a trade war," said James Andrew Lewis, a senior vice president at CSIS, who previously worked for the US Commerce Department, where he led the organization's work on national security and espionage concerns related to high-technology trade with China. 

Read more: Asian markets jittery over trade war fears

Andrew Wedeman, a China scholar at Georgia State University, agreed that Trump's tariffs versus Beijing, estimated to be as a high as $60 billion (€49 billion), will ignite a trade war because China will retaliate.

A response from China

"The Chinese are likely to strike back at things like agricultural products," he said. "They are not stupid."

While both scholars are on the same page that the US president just launched a trade war, they disagree over whether such a move is necessary and useful to counter what are widely seen as unfair trade practices in areas such as intellectual property rights and market access.

Read more: Can Trump succeed in curbing China's intellectual property 'theft'?

Lewis said punishing Beijing for its continuous trade transgressions by imposing massive tariffs is "something that has been overdue" for years.

Chinese economic espionage, he said, has cost the US tens of billions of dollars every year for the last 20 years. But because China was a smaller economy, people just considered this loss as the price of doing business with Beijing.

China USA Donald Trump & Xi Jinping | Treffen mit Wirtschaftsführern in Peking
Trump's tariffs will strain ties with Chinese President Xi Jinping Image: Reuters/D. Sagolj

Unsustainable losses

"Now China is the second-largest economy in the world," said Lewis. "People can't take this loss anymore."

China scholar Wedeman agreed that Beijing's transgressions on intellectual property issues have been a vexing and an unresolved issue for the US for decades. But he doubted that Trump's tariff move is the best way to remedy Washington's legitimate grievances.

"Trying to use tariffs as way of dealing with that problem is like using a sledgehammer when a scalpel is more appropriate," he said.

Read more: Free trade and unwanted friends

Wedeman also expressed skepticism that Trump's tariff plan was undergirded by a coherent strategy.  

"I don't think he thought it out very much and I don't think Trump really understands that the Chinese are going to hit back," he said. "And they are going to hit back hard and they have the capability to hit back hard."

Aside from agricultural products like soybeans which could hurt US farmers, China — the world's biggest airplane market — could also retaliate on sectors like aviation, said Lewis. "How happy is Boeing going to be if the Chinese decide, 'we don't want to buy Boeing airplanes anymore, we are going to buy the Airbus from the EU?'"

Read more: Former US ambassador 'appalled' by Trump foreign policy

Is there a strategy?

CSIS' Lewis shares Wedeman's concerns about a possible lack of strategic planning regarding the China tariffs and what they are actually intended to achieve.

"The dilemma here is as usual: Does the administration actually have a strategy, a defined objective and a path to getting to that objective?" he asked. "And the objective has to be coming to a new understanding with China and our other international trade partners how international trade will work and how it will be a little fairer in some areas. This strategy may exist — there is just no visible sign of it."

Read more: Does Donald Trump eye a weak dollar?

A further indicator that a strategy behind the China tariffs move may indeed be lacking is Trump's equally tough trade stance against important allies which he displayed again in his remarks in announcing the tariffs on Beijing. 

"There is a sign that people haven't thought hard enough about this, because China is a huge problem for the global economy, not just for the US, but for our allies," said Lewis. "And if you were going to finally engage the Chinese in what's going to be very hard discussions, you would not start by alienating Germany, Canada, Mexico — some of your key trade partners. That makes you wonder."

Bayer Übernahme Monsanto
US soybeans are considered a likely retaliatory target for ChinaImage: picture-alliance/Zumapress/R. C. Byer

Ultimate aim is fairer trade, not punishing China

But although Lewis is skeptical about the Trump's administration's level of preparedness and planning for what he thinks will be a robust Chinese response to Washington's tariffs, he nevertheless is convinced that imposing tariffs was the right thing to do. 

"It is better than doing nothing, which is what the previous two administrations did," he said.

But make no mistake, added Lewis, Trump's tariffs leading to a trade war with China should not be viewed as an end in itself.    

"The goal cannot be just to punish China," he said. "The goal has to be rebuilding global trade."

The problem, however, conceded Lewis, could be that building a fairer, more equitable rules-based global trade framework may not be what Trump had in mind when he kicked off a US-China trade conflict.