Should we rule out a trade war between China and the US?
Andy Rothman, investment strategist at Matthews Asia, says Yes.
Donald Trump is very unlikely to implement the 45 per cent across-the-board tariff on imports from China that he proposed in an interview last year. US law permits the President to make only an emergency declaration of 15 per cent tariffs for up to five months, and I imagine that many chief executives have been calling Trump to advise him of the negative consequences of such a move for their firms. More than 900,000 American jobs are supported by US exports of goods and services to China, with 40 per cent of those jobs created between 2009 and 2015. I also imagine Trump will be advised that a tariff hike would have a significant impact on consumer prices in the US, pushing up prices for goods sold at places such as Walmart. That would hurt the spending power of his working-class political base. These factors are likely to lead the President-elect to take a more targeted approach, raising import tariffs on a limited number of goods, probably those which are not destined directly for American consumers, such as steel.
Marianne Petsinger, geoeconomics fellow of the US and the Americas Programme at Chatham House, says No.
On the campaign trail, Donald Trump blamed China for stealing US manufacturing jobs and lowering wages. To remedy this, he vowed to impose tariffs on Chinese imports, to bring trade cases for “unfair subsidy behaviour” and to label the country a currency manipulator. Given how central the anti-trade rhetoric was to Trump’s platform, he will likely try to deliver on his promise. While it is improbable that Trump will follow through on his proposal to impose 45 per cent tariffs on Chinese goods, he might impose tariffs between 5-15 per cent – which would be enough to spark a trade spat. The US President has the power to impose tariffs under certain circumstances without congressional approval. In addition, Trump’s recent nominations for United States trade representative, treasury secretary and head of the newly-created National Trade Council, are long-time critics of China’s trade practices. While this does not make a US-China trade war inevitable, the potential risk is non-negligible.