Brace for a sanctions-induced trade war between the world’s two biggest economies
“M ove over, Putin. Xi Jinping (習近平) is Trump ’s new man-crush, ” headlined Slate on a moonstruck US president who couldn’ t stop gushing about the Chinese leader after their Mar-a-Lago summit three months ago. They had struck a “great chemistry” and “terrific relationship”, and the US and China would now work together, he declared to the world, in an extraordinary turnaround for a man who built a political career trashing China.
The sole factor behind the change of heart was North Korea. He was willing to keep his protectionist passion in check if China showed its troublesome neighbour some tough love. “I really feel that he is doing everything in his power to help us with a big situation, ” he effused in one interview at the time, praising Xi’s government for turning back coal shipments from North Korea.
This week, all that wide-eyed optimism was gone, replaced by the bitterness of a disillusioned suitor coming to terms with the folly of his misplaced affections, as North Korea tested its first intercontinental ballistic missile (ICBM) .
Before embarking on his Europe tour for the G20 summit, a tweet from an injured Trump on Wednesday read: “Trade between China and North Korea grew almost 40 per cent in the first quarter. So much for China working with us – but we had to give it a try!”
“The situation with North Korea has entered a particularly dangerous phase; the fallout with China is unclear, ” said Satu Limaye, director of the East-West Centre in Washington. “The ballasts for US-China relations are less grounded now and we may be entering a period of particular dissonance between Beijing and Washington.”
Like other North Korean missile tests, the one on July 4 that has thrown the brief tango between the two powers off balance was a lofted vertical launch. But this one reached a height of 2,800km. In a more typical horizontal trajectory, it could have travelled 6,500km, putting all of Alaska within its range. Though the lower 48 American states and Hawaii would still be out of reach, the threat of a nuclear strike on the US mainland now looks increasingly real – a risk Trump thought he had hedged against by doubling down on Xi.
“For Xi, the test was a slap in the face, ” said Sourabh Gupta, a senior fellow at the Institute for China-America Studies in Washington.
“A nuclear test and an ICBM test were Trump’s no-no and Xi has failed to deliver on this front. Remember that Trump had in January set a red line when he tweeted that an ICBM test ‘won’ t happen’ . This is as much a defeat for Trump as it is a humiliation for Xi.”
With the latest test, Kim Jong-un has now launched more missiles in one year than his father did in 17 years in power, “punching holes in Trump’s tweeted façade of strength”, as Gupta put it. And the more holes he punches, the more steam Trump blows off. Since there’s no easy way to tame or punish Kim, much of that ire is targeted at Beijing. In Poland, asked about possible military action against North Korea, Trump merely said he has “some pretty severe” options but “that doesn’ t mean we are going to do it”.
The fact is, there is basically no military option, said Charles Morrison, distinguished senior fellow and former president of the East-West Centre in Hawaii. “They hold Seoul hostile to an artillery attack, and no South Korean government, especially the new one, is going to agree that military action is a good idea.”
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In that case, the best Trump can do is go after Kim’s purse, which puts Chinese companies squarely in the cross hairs. In the past few days, the US has downgraded China to the lowest tier on its global list of human trafficking and forced labour offenders and slapped sanctions on two Chinese citizens, China’s Bank of Dandong and a shipping company for aiding Pyongyang. There are also murmurs of possible trade actions against Beijing such as tariffs on steel imports. One of Trump’s other tweets on Wednesday read: “The United States made some of the worst trade deals in world history.
